Vivad se Vishwas Scheme 2024: How new policy can save your time, money to resolve tax disputes

The Direct Tax Vivad se Viswas Scheme 2024 (VSV 2.0), which is the second edition of a scheme with same name, will be effective from October 1. Finance Minister Nirmala Sitharaman during her Union Budget 2024 speech announced the scheme that is expected to reduce the litigations related to income tax. 

FM Sitharaman, in her 2024 Budget speech, had said: “For resolution of certain income tax disputes pending in appeal, I am also proposing Vivad Se Vishwas Scheme, 2024.”

The Direct Tax Vivaad Se Vishwas Act, 2020 (VSV 1.0) was introduced to address pending appeals as of January 31, 2020. It received a positive reception from taxpayers and resulted in significant revenue generation for the government. The disputes resolved under VSV 2.0 will result in the waiver of penalties and interest, as well as guaranteeing no prosecution will be pursued.

"The Direct Tax Vivad Se Vishwas (VsV) Scheme 2024 is introduced to enable the resolution of direct tax appeals pending as of 22 July 2024, before the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal, High Courts, or the Supreme Court. This Scheme aims to facilitate the resolution of pending appeals related to income tax disputes. The Direct Tax Vivad Se Vishwas Scheme 2024 shall take effect on 1 October 2024 and has been enacted pursuant to the provisions of the Finance (No. 2) Act, 2024," said noted CA Dr Suresh Surana.

Here are top points:

Scheme features

The program enables taxpayers to resolve pending appeals, writ petitions, and special leave petitions as of a specified deadline before various judicial bodies including the Supreme Court, High Courts, ITAT, Commissioner (Appeals), and Joint Commissioner (Appeals). Additionally, it includes cases with objections lodged with the Dispute Resolution Panel (DRP) without a final assessment order issued, as well as ongoing revision applications before the Commissioner.

Who can avail benefits of this scheme 

1. Any person other than the following mentioned person can opt for VsV Scheme 2024, [Section 96 of Finance (No.2) Act, 2024]
2. For tax arrears related to: -
3. Assessments made under specific sections of the Income Tax Act based on searches.
4. Assessment years where prosecution has started before the declaration is filed.
5. Undisclosed income or assets located outside India.
6. Assessments based on information from international agreements under sections 90 or 90A of the Income Tax Act.
7. To anyone who has been detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, before filing the declaration, unless certain conditions regarding revocation apply.
8. To anyone facing prosecution under various laws, including the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prohibition of Benami Property Transactions Act, 1988, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, before filing the declaration or who has been convicted of such offenses.
9. To anyone prosecuted by the Income Tax authority for offenses under the Bharatiya Nyaya Sanhita, 2023, or for civil liabilities on or before the declaration is filed, or who has been convicted of such offenses.
10. To anyone notified under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, on or before filing the declaration.

Forms for the scheme

The procedure for availing benefits under this scheme includes compliance in the following Forms

3. Timing to settle disputes

Under the terms of this arrangement, the settlement sum is subject to variation depending on the timing of payment. Taxpayers opting to settle their dues between October 1, 2024, and December 31, 2024, are required to remit either the disputed tax in full or 25 percent of the contested interest, penalty, or fee. 

Conversely, individuals settling their liabilities after the specified period are obliged to pay 110 percent of the disputed tax or 30 percent of the interest, penalty, or fee. In cases where the tax department lodges an appeal, the payment amount is reduced by half.

4. Amount payable by the declarant

Pursuant to this Scheme, if a declarant applies to the designated authority concerning tax arrears within the prescribed deadline, the amount payable by the declarant under this Scheme shall be determined as set forth in the table below. 

This determination shall prevail notwithstanding any provisions of the Income-tax Act or any other applicable laws in force. Any order made regarding the payable amount is final and cannot be challenged in any other legal proceedings.

5. What is not covered in VsV Scheme 2024

In the VsV Scheme 2024, significant changes have been made in comparison to VsV 2020. Notably, search cases, which were addressed in VsV 2020 for assessments up to Rs 5 crore, have been completely omitted from VsV 2024. Furthermore, the scheme does not cover arbitration, conciliation, or mediation cases. Additionally, cases where an assessment or appellate order has been issued, but the appeal deadline does not extend beyond July 22, 2024, are not eligible for VsV 2024. Mutual Agreement Procedure cases, cases related to undisclosed foreign income or assets, and cases involving prosecution are also not included in VsV 2024.