Vivad Se Vishwas Scheme 2024: FAQs released on how to resolve income tax disputes

The Finance Ministry has issued a set of FAQs outlining the Direct Tax Vivad Se Vishwas Scheme, 2024. The Vivad se Vishwas scheme, originally introduced in 2020 to address pending tax disputes, is set to become operational on October 1. The scheme provides taxpayers with an opportunity to resolve specific unresolved tax issues. Due to its successful implementation, Finance Minister Nirmala Sitharaman has included a modified version in the Union Budget for 2024 to tackle disputes arising after that date.

This scheme primarily focuses on settling disputes that were pending as of July 22, 2024. Taxpayers who are currently entangled in disputes related to tax, interest, penalties, or fees before appellate bodies, high courts, or the Supreme Court are eligible to participate in this initiative.

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The scheme was enacted through the Finance (No. 2) Act, 2024. Additionally, the corresponding Rules and Forms for implementing the Scheme were notified on September 20, 2024.
 
“In order to facilitate the various queries raised by the stakeholders following the enactment of the Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024, the Central Board of Direct Taxes (CBDT) has today issued a Guidance Note in the form of Frequently Asked Questions (FAQs). This note is designed to provide clarity and assist taxpayers in better understanding the provisions of the Scheme,” said the ministry in its latest statement.

"The government recently introduced the DT VSV Scheme 2024 through the Finance Act (No. 2), 2024. The scheme aims to reduce pending income tax litigation and generate revenue for the exchequer. It seeks to provide much-needed tax certainty and peace of mind, allowing taxpayers to save time, effort, and resources typically spent on protracted litigation. The Central Board of Direct Taxes (CBDT) has issued a guidance note containing detailed FAQs on 15th October 2024, to address various aspects of the scheme. This will help clear doubts in the minds of taxpayers, professionals, and tax authorities, ensuring uniform and smooth administration and implementation. As we progress, we hope that additional issues, doubts, and questions will be clarified, similar to the process followed with a previous VSV scheme in 2020," said Harsh Bhuta, Partner, Bhuta Shah and Co LLP.

> Which tax appeals will be resolved

A person who has an appeal, writ petition (WP), or special leave petition (SLP) filed by either themselves, the Income Tax authority, or both, before an appellate forum, with the matter still pending as of the specified date, i.e., July 22, 2024;

or
 
A person who has submitted objections before the Dispute Resolution Panel (DRP) under Section 144C, and the DRP has not issued any directions by July 22, 2024; or
 
A person whose case has received directions from the DRP under Section 144C (5) but the assessing officer (AO) has not completed the assessment under Section 144C (13) by July 22, 2024; or
 
A person who has filed an application for revision under section 264 of the Act, and the application remains pending as of July 22, 2024.
 
> Which cases are not covered under the scheme
 
Cases pertaining to an assessment year where the assessment was completed under Sections 143(3), 144, 147, 153A, or 153C, based on a search conducted under sections 132 or 132A.
 
Cases related to an assessment year where prosecution was initiated before the declaration was filed.
 
Cases involving undisclosed income from foreign sources or undisclosed assets located outside India.
 
Cases where the assessment or reassessment was based on information received through an agreement under sections 90 or 90A, if it relates to any tax arrears.
 
> Types of forms specified in the scheme
 
Form-1: Form for filing declaration and undertaking by the declarant.
 
Form-2: Form for certificate to be issued by designated authority.
 
Form-3: Form for intimation of payment by the declarant.
 
Form-4: Order for full and final settlement of tax arrears by designated authority.
 
> What are various timelines specified in the scheme
 
Declaration and Undertaking shall be filed by tax payer in Form-1 on or before 31.12.2024 to keep the amount payable on the lower threshold. In case of filing the declaration and undertaking beyond 31.12.2024, amount payable will increase as specified in, rates Table-1 above.
 
The Designated Authority shall issue Form-2 within a period of fifteen days from the date of receipt of the declaration to determine the amount payable by the taxpayer.
 
The tax-payer shall pay the amount as determined in Form-2 within a period of fifteen days from the date of receipt of the certificate, and shall intimate the details of such payment in Form-3.
 
Upon receipt of Form-3, Designated Authority shall pass an order in Form-4 stating that the tax- payer has paid the full and final amount.
 
> Are disputes related to other taxes covered?
 
Only Income Tax disputes are covered.
 
Based on the circular issued by the tax department, here is a table outlining the percentage of the disputed amount that needs to be deposited when applying for the Direct Tax Vivad Se Vishwas 2024 Scheme.