New Delhi, January 19, 2017

The Central Board of Direct Taxes (CBDT) on Wednesday clarified that no credit will be allowed against advance tax paid or the tax deducted at source (TDS) or tax collected at source (TCS) in respect of the income declared under Pradhan Mantri Garib Kalyan Yojna (PMGKY). This is in contrast to the earlier Income Declaration Scheme (IDS) under which these credits were allowed.

About R65,250 crore was declared under IDS during the June-September period and 45% of this amount is expected to be collected by the government as taxes. The amount declared under the scheme is, however, likely to be revised downwards to around R55,000 crore.

PMGKY is meant to give an opportunity to those who deposited tax-evaded money in bank-demonetised currencies during the window that was available till December 30 to come clean. It was opened on December 17 last year and will remain open till March 31. Under the scheme, a person declaring undisclosed income would need to pay a tax of 30%, in addition to a penalty of 10% and a Pradhan Mantri Garib Kalyan cess of 33% on the tax. This adds up to 49.9% of the undisclosed income. Additionally, the person making the declaration would require to deposit 25% of the undisclosed income in the zero-interest scheme for four years.

“Under the Income Declaration Scheme (‘IDS’), the government has allowed TDS credit in those cases where such credit has not already been claimed in the income-tax return. However, it denied the credit of TDS, TCS and advance tax under PMGKY. Thus, there is no logic why practical approach adopted under IDS is not made applicable under PMGKY. It is recommended that the government reconsider its decision of denying credit of TDS, TCS and advance tax and adopt practical approach on lines of IDS,” Rakesh Bhargava, director, Taxmann, said.

The IDS, which was open from June to September last year, allowed persons who hadn’t paid full taxes in the past to declare their income and assets. However, unlike PMGKY, the declarants were allowed to avail credit for TDS against declared income. According to the scheme, the disclosures were to be levied with 30% tax and another 15% as surcharge and penalty, adding up to 45% of the total undeclared income.

[The Financial Express]