The IDS’2016- CBDT clarifies that effective rate of tax is 45% and not 31% vide Circular No. 27 of 2016 dated 14-07-2016
The Income Declaration Scheme, 2016 incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all 45% of such undisclosed income declared.
As you may be aware, there had been discussions in certain quarters suggesting that the effective rate would be 31% since the source of the tax payment would also not be questioned.
Today i.e. on 14th July, the CBDT has issued a Press Release vide Circular No. 27 of 2016 dated 14-07-2016 in which reference has been made to a fresh set of FAQs and there is a specific mention of the issue revolving around the effective tax rate. It has been clarified that the tax rate is 45% ( and not 31%) and that the tax payment has to be made out of disclosed sources. In the event that the tax is also paid out of undisclosed sources, that amount has also to be included in the declaration made under the IDS.
*With this CBDT debunks the 31% IDS tax rate theory and thereby an unnecessary controversy has come to an end.*
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