Direct Tax Vivad se Vishwas Scheme 2024: A Step Towards Resolving Tax Disputes

?Direct Tax Vivad se Vishwas Scheme 2024: A Step Towards Resolving Tax Disputes

?The Indian government introduced the Direct Tax Vivad se Vishwas Scheme (VSV) in 2020 as part of its efforts to settle pending tax disputes. In 2024, the government launched an enhanced version of this scheme, known as the Direct Tax Vivad se Vishwas Scheme 2024, with a renewed focus on resolving tax litigation and disputes effectively. This initiative reflects the government's commitment to reducing the litigation burden on both taxpayers and tax authorities, thereby streamlining the tax resolution process.

??Objectives of the Scheme

?The primary aim of the Direct Tax Vivad se Vishwas Scheme 2024 is to:

1. Reduce tax litigation: By offering a settlement window, the scheme seeks to reduce the number of pending tax-related cases, which have been a significant burden on both taxpayers and the judiciary.

2. Provide speedy resolution: The scheme provides a framework for the speedy settlement of tax disputes, ensuring that both parties can avoid prolonged litigation.

3. Boost tax collection: The scheme is also designed to improve revenue collection by encouraging taxpayers to settle disputes and pay outstanding dues.

4. Encourage voluntary compliance: The scheme incentivizes taxpayers to come forward and resolve their disputes voluntarily, fostering a culture of compliance.

Key Features of the 2024 Scheme

?The Direct Tax Vivad se Vishwas Scheme 2024 includes several key features aimed at making the dispute resolution process more efficient:

?1. Scope and Coverage:

A.????? The scheme applies to all disputes pending before:

???? - Supreme Court (SC)

???? - High Court (HC)

???? - Income Tax Appellate Tribunal (ITAT)

???? - Commissioner of Income Tax (Appeals) (CIT(A))

???? - Joint Commissioner of Income Tax (Appeals) (JCIT(A))

B.????? The scheme covers disputes where demands have been raised and appeals have been filed by either the taxpayer or the department before 22/07/2024.

?2. Settlement Provisions:

??? - If Appeal is filed between 01-02-2020 and 22-07-2024:

- TAX + INTEREST + PENALTY + FEES: Pay 100% of the tax by December 31, 2024, or 110% of the tax afterward.

- INTEREST + PENALTY + FEES: Pay 25% of interest, penalty, and fees by December 31, 2024, or 30% afterward.

??? - If Appeal is filed before 31/01/2020:

- TAX + INTEREST + PENALTY + FEES: Pay 110% of the tax by December 31, 2024, or 120% afterward.

- INTEREST + PENALTY + FEES: Pay 30% by December 31, 2024, or 35% afterward.

?- If the Income Tax Department has filed an appeal on the same issue before any appellate forum (e.g., CIT(A), ITAT, High Court), the amount the taxpayer (declarant) needs to pay under the scheme will be half of the amount calculated using the standard rates shown in the table above. This means that the taxpayer benefits from a reduced payment requirement in cases where the tax department initiated the appeal.

- If the declarant (taxpayer) has already secured a favorable order on the same issue for a previous assessment year (and this order has not yet been overturned by a higher appellate authority), the amount payable under the scheme will also be half of the amount calculated using the standard table. This allows taxpayers who have had favorable rulings in the past on the same issue to settle at a lower cost.

?3. Manner of Computation of Disputed Tax in Case of:

??? A. Where Loss or Unabsorbed Depreciation is Reduced:

?? - Option 1: Include the tax payable (including surcharge and cess) on the reduced amount of loss or depreciation in the?disputed tax and ignore the reduction for future carryforward purposes.

?? - Option 2: Carry forward the reduced loss or depreciation without adjusting for the reduction and continue using the lower amount in future years.

If the taxpayer chooses to carry forward the reduced amount of loss or unabsorbed depreciation (Option 2), they will be liable to pay tax (including surcharge, cess, and interest) in future years, based on the reduced carry-forward amount. For cases involving unabsorbed depreciation, the written down value (WDV) of the asset block at the end of the year in which the depreciation was reduced cannot be increased by the amount of reduction in depreciation.

If the reduction of loss or unabsorbed depreciation relates to issues already decided in favor of the taxpayer, only half of the reduction will be considered when computing the adjusted amount to be carried forward. This reduces the impact of the reduction for the taxpayer.

B. Minimum Alternate Tax (MAT) Credit is Reduced:

?? - Option 1: The taxpayer can include the amount by which the MAT credit has been reduced in the disputed tax and continue carrying forward the original MAT credit, ignoring the reduction.

?? - Option 2: The taxpayer can carry forward the reduced MAT credit, accepting the lowered amount for future years.

?If the declarant chooses to carry forward the reduced MAT credit (Option 2), they will be liable to pay tax (including surcharge and cess), along with interest, as a consequence of carrying forward the reduced MAT credit in subsequent years. This means the future tax liability will be based on the adjusted (reduced) MAT credit.

If the reduction in MAT credit is related to issues decided in favor of the taxpayer (declarant), only half of the reduction in MAT credit will be considered for adjustment. This benefits the taxpayer by reducing the amount of MAT credit loss.

4.??? Dispute Resolution Process

?1. Filing of Form 1 by the Declarant:

?? - The process begins when the declarant (taxpayer) submits Form 1, declaring their intention to settle the tax dispute under the Vivad se Vishwas Scheme.

?2. Issuance of Form 2 by the Income Tax Department:

?? - Once Form 1 is submitted, the Income Tax Department is required to issue a certificate in Form 2 within 15 days. This certificate outlines the amount payable by the declarant to settle the dispute.

?3. Payment by Declarant and Submission of Form 3:

?? - After receiving Form 2, the declarant is responsible for depositing the amount payable as per the certificate within 15 days. Once the payment is made, the declarant must inform the Income Tax Department by submitting Form 3, confirming the payment.

The Direct Tax Vivad se Vishwas Scheme 2024 is a progressive step towards resolving tax disputes in India. By offering taxpayers an efficient and cost-effective means to settle disputes, the scheme fosters greater compliance and trust between taxpayers and the government. While there are certain challenges to be addressed, the overall impact of the scheme is expected to be positive, leading to faster dispute resolution, increased revenue collection, and a reduction in the litigation burden on both taxpayers and the authorities.

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