Tax alert

The Indian government introduced the Direct Tax Vivad Se Vishwas Scheme, 2024, under the Finance (No.2) Act, 2024. The scheme enables taxpayers with pending tax disputes to settle their cases, reducing litigation and freeing resources for both the government and taxpayers. It seeks to streamline the process of resolving tax arrears and ensures that cases do not linger in court for extended periods.

Key Features of the Scheme

1. Eligibility for the Scheme

The scheme is applicable to taxpayers who have:

• Appeals or petitions filed and pending as of 22nd July 2024.
• Objections filed before the Dispute Resolution Panel (DRP) without receiving a final direction.
• Cases where assessments are not completed before the specified date despite the appeals being filed.

However, the scheme excludes certain types of cases, including disputes related to foreign assets or income.

2. Non-Eligible Cases

The following cases do not qualify under the scheme:

• Disputes arising from search or seizure operations.
• Cases involving prosecution or undisclosed foreign income/assets.
• Cases that have gone through specific prosecution processes such as COFEPOSA or PMLA.

3. Amount Payable

Depending on the nature of the dispute, the taxpayer is required to pay different amounts:

• For tax arrears, 100% of the disputed amount is payable before 31st December 2024.
• For penalties or interest, a percentage of the disputed amount needs to be paid, with higher percentages for cases settled after 1st January 2025.

4. Forms and Process

Taxpayers need to complete the process of filing applications with the authority:

Step 1: Declaration of dispute in Form-1

Step 2: Authority within 15 days to grant certificate specifying amount payable in Form-5

Step 3: Tax to be deposited by applicant within 15 days

Step 4: Final order to be passed marking conclusion of dispute.

Benefits of the Scheme

• Quick Resolution: By joining the scheme, taxpayers can settle their disputes without waiting for years of court proceedings.
• Lower Financial Impact: The scheme allows taxpayers to settle disputes by paying the basic tax arrear without additional penalties, making it financially advantageous.
• Certainty in Tax Matters: Taxpayers can gain closure on their disputes, allowing them to move forward with confidence about their tax liabilities.

How to Apply

Taxpayers can apply by submitting the appropriate forms before the relevant deadlines. Payments must be made within 15 days of receiving the tax calculation certificate. Additionally, any ongoing appeals or petitions must be withdrawn before the final settlement is processed.

The Direct Tax Vivad Se Vishwas Scheme, 2024, offers a practical solution to resolve income tax disputes without the need for prolonged litigation. Taxpayers can benefit from reduced penalties and interest, while the government achieves faster revenue collection. It’s a rare opportunity for both sides to settle disputes in a win-win manner—time-bound, efficient, and cost-effective.