Voluntary Disclosure of Income Scheme
The National Development Council (NDC) meeting proposed the launch of the Voluntary Disclosure of Income Scheme. Then the planned budget was formulated in the year 1997-98 to commence the scheme. It was then launched as an effort to unearth black money. The main objective of the scheme was to harness the black money and use it for productive and useful activities.
The Voluntary Disclosure of Income Scheme, 1997 was able to net Rs 10,050 crore as additional revenue, on an undisclosed income of about Rs 33,000 crore, far exceeding the government expectations. The total number of declarants under the scheme was about 4,66,031. Thus about 4.66 lakh declarants had availed of the amnesty scheme which had helped in tapping a substantial chunk of the black money.
Clauses of the Voluntary Disclosure of Income Scheme:
- The amount disclosed by a person or an institution which may either be in the form of assets or cash would be applicable at the revised highest rate of tax.
- This clause was applicable to an individual located within or outside the country.
- Under the Income Tax action, immunity would be also granted.
- Interest would be waived off.
- Penalty would be waived off.
Criteria for Using the Voluntary Disclosure of Income Scheme:
If a person fulfills any two of the following points can use VDIS
- If a person subscribes to a telephone connection;
- Occupies an immovable property exceeding a specified floor area by ownership; tenancy or otherwise;
- Owns or has a leased motor vehicle; and
- Has traveled abroad or financed the foreign travel of any person during the last one year, and has never declared his taxable income in the past, he can now make use of the Voluntary Disclosure of Income Scheme ’97 by declaring income or wealth used for acquiring property/motor vehicle.
Advantages of the Voluntary Disclosure Of Income Scheme:
The scheme facilitates the ease with which any individual could declare his/her undisclosed salary/income of the previous years. According to the clause set in the scheme, under the Income Tax Act, of the year, 1961, any such declaration made by the individual would not be used against him/her. Also, the person would not be harassed or bullied. He/she would not be questioned in an unethical way.
In addition to this, the individuals were benefitted from the least tax rate ever set, which was equivalent to 30% for individuals as well as 35% for the case of firms and organizations.
Accomplishments of the Voluntary Disclosure of Income Scheme:
The following things can be considered to be the achievements of the Voluntary Disclosure of Income Scheme:
- 77.5% of the total assets, which was about Rs 4,379 crore, would be granted to the state governments, which would be used in social sectors as well as infrastructural development.
- Total resources were secured under the scheme.
- The remaining portion, which would be granted to the Central Government would be used for providing finances for the infrastructure needs.
- The Central Government funds would also be used for financing the basic minimum services program.
- A total of Rs 33,000 crore of black money was found as a result of the implementation of this scheme. This was equivalent to nearly 33% of the unaccounted money throughout the nation.
- Rs 10,050 crore was collected as additional revenue, where the undisclosed income of about Rs 33,000 crore,
- The total declarants accounted for about, who availed of the scheme. This simulated the collection of a big chunk of black money.
Criticism of the Voluntary Disclosure of Income Scheme:
- The assets which were to be assigned to the State Governments were then decided to be devolved to the states from the VDIS collections. This decision was led by the BJP govt. in its Interim Budget, 1997-98.
- The amount to be alloted to the state governments was set to disburse the amount for the full year, though this amount was to be devolved by the end of the year, that is, 1997 December. The amount accounted for a total of Rs 7,594 crore.
Related Frequently Asked Questions and Answers:
Q1. Who introduced the voluntary disclosure of income scheme?
Answer: The VDIS was launched by Mr. P Chidambaram in the year, 1997-98. His thought process was that any individual pays tax only in the case when he is bludgeoned.
Q2. Define the term IDS in Income Tax.
Answer: The IDS stands for the Income Declaration Scheme. It was declared in the year 2016. It provided the following opportunities :
- To those who had not made a proper declaration of the income.
- Allow a citizen to pay the taxes
- Allow the citizen to disclose the income which is not declared.
Q3. Define Undisclosed Income.
Answer: The term “undisclosed income” is used to include assets in any form, for instance, money, jewellery, or valuable articles. It is also inclusive of the income based on book entries of accounts or any other miscellaneous transactions.