The Central Board of Direct Taxes (CBDT) has unveiled the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSV, 2024), designed to resolve outstanding appeals related to income tax disputes. This initiative will take effect on October 1, 2024.
Building on the success of VsV 2020 initiative, the government introduced the Direct Tax Vivad Se Vishwas Scheme, 2024, to address the backlog of pending litigations and disputes. This scheme enables eligible taxpayers to resolve their tax disputes by paying a designated portion of their outstanding dues.
The Direct Tax Vivad Se Vishwas Scheme is applicable to a range of disputes that are pending as of July 22, 2024:
- An appeal, writ or special leave petition submitted by either the taxpayer or the tax authority to the Appellate Forum; or
- Objections submitted to the Dispute Resolution Panel (DRP) under Section 144C of the Income-tax Act, 1961 (IT Act), provided the DRP has yet to issue any directives; or
- The DRP has issued directions under Section 144C(5) of the IT Act, but the tax officer has yet to finalize the assessment under section 144C(13) of the same Act; or
- Application submitted under section 264 of the IT Act
The scheme excludes specific cases, such as those related to search and seizure, prosecution, undisclosed income or assets held abroad, and matters governed by other specified laws.
The payment amounts required from taxpayers under the Scheme detailed below:
| Details | Tax Arrears | Amount Payable before 31.12.2024 | Amount due on or after 1.01.2025, but no later than the final deadlines |
| Appeal is filed after 31/01/2020 | Where the tax in arrears is the aggregate of (i) Disputed tax (ii) Interest chargeable/ charged, (iii) Penalty leviable/levied | Amount of the disputed tax | Amount of disputed tax + 10% of disputed tax |
| Appeal is filed before 31/01/2020 | Where the tax in arrears is the aggregate of (i) Disputed tax (ii) Interest chargeable/charged (iii) Penalty leviable/levied | Amount of disputed tax + 10% of disputed tax | Amount of disputed tax + 20% of disputed tax |
| Appeal is filed after 31/01/2020 | Where the tax in arrears relates to, (i) Disputed interest or (ii) Disputed Penalty or (iii) Disputed fee | 25% of the disputed Amount | 30% of the disputed Amount |
| Appeal is filed before 31/01/2020 | Where the tax in arrears relates to, (i) Disputed interest or (ii) Disputed Penalty or (iii) Disputed Fee | 30% of the disputed Amount | 35% of the disputed Amount |
In cases where a dispute for a fiscal year involves a reduction in loss or unabsorbed depreciation to be carried forward under the Income Tax Act, the declarant will have the following options:
- Include the tax (along with applicable surcharge and cess) on the amount by which the loss or unabsorbed depreciation has been reduced in the disputed tax, while allowing the loss or unabsorbed depreciation to be carried forward as if the reduction did not occur; or
- Transfer the reduced amount of loss or unabsorbed depreciation after settling the tax (including surcharge and cess), along with any applicable interest.
Additionally, if the reduction pertains to issues favorable to the declarant, only 50 percent of the amount by which the loss or unabsorbed depreciation is diminished will be considered for the reduction.
In case where the dispute for a fiscal year involves a reduction in MAT credit to be carried forward, the declarant will have the option to:
- Include the reduced amount of MAT credit in the disputed tax and carry forward the full MAT credit by disregarding this reduction, or
- Carry forward the decreased MAT credit after settling the tax, including any applicable surcharges and cess, along with accrued interest.
Four distinct forms have been established for the implementation of the DTVSV Scheme, detailed as follows:
- 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
The DTVSV Scheme stipulates that Form-1 must be submitted separately for each individual dispute. However, if both the appellant and the income-tax authority have filed an appeal concerning the same order, a single Form-1 may be filed for that particular case.
Payment notification must be submitted using Form-3, which should be provided to the Designated Authority along with proof of any appeal, objection, application, writ petition, special leave petition, or claim.
Forms 1 and 3 must be submitted electronically by the declarant. These forms will be accessible on the Income Tax Department’s e-filing portal at www.incometax.gov.in.
Payment notification should be completed using Form-3, which must be submitted to the Designated Authority along with proof of withdrawal for the appeal, objection, application, writ petition, special leave petition, or claim. Both Forms 1 and 3 are required to be filed electronically by the declarant.
Submitting a declaration under the VSV Scheme 2024 does not imply that the taxpayer has accepted or conceded to the tax assessment. Rather, it offers protection against any proceedings, penalties, or interest concerning tax arrears for cases chosen to participate in the scheme. This crucial distinction ensures that taxpayers can seek resolution without compromising their positions. Ultimately, the DTVSV Scheme 2024 serves as a valuable tool for taxpayers, enabling them to address their disputes efficiently while minimizing potential financial repercussions.