Declaring undisclosed assets: Tax dept allays capital gains worries

CBDT has clarified that the period of holding of immovable property will be taken on the basis of the actual acquisition date.

By: ENS Economic Bureau | New Delhi | Published:August 19, 2016 2:08 am

Allaying the concerns of potential users of the Income Declaration Scheme (IDS) window over hefty capital gains tax outgo in addition to the 45 per cent tax they need to pay while declaring undisclosed assets under the scheme, the Central Board of Direct Taxes on Thursday clarified that the period of holding of the immovable property will be taken on the basis of the actual acquisition date of the property and not from June 1 2016 as specified earlier.

Tax experts said since most declarants under the scheme could require to sell their assets to meet the IDS tax liability, the relaxation would come in handy for them and improve the scheme’s ability to uncover unaccounted wealth.

Also, the department clarified that either it or the Financial Intelligence Unit won’t take any adverse action solely on the basis of cash deposits made in banks from the sale proceeds for IDS declaration “…where acquisition of an immovable property is evidenced by a registered deed, an option shall be available with the declarant to declare the fair market value of such property by applying the cost inflation index to stamp duty value of the property … the period of holding of assets under the Scheme shall be taken on the basis of the actual date of acquisition of such asset and not from 1.6.2016 as clarified earlier,” a CBDT release said.

“Many of the undisclosed assets to be revealed under IDS would be disposed to pay tax liabilities and would be treated as long-term in nature for majority of cases if the holding period is taken from the acquisition date. This would attract lower tax liabilities in case of disposal. When taxpayers are willing to come out clean then they should be able to start with a clean slate,” said Amit Maheshwari, partner at Ashok Maheshwary & Associates LLP.

In an interview with The Financial Express, CBDT chairperson Rani Singh Nair said IDS would be accepted as declaration during future search and seizure operations also. “If, say, 10 years later, a search happens, then you can say that you have declared this house/land/share in the IDS,” she said.

The CBDT also said that in cases where loans, creditors, advances received, share capital or payables are disclosed in the audited balance sheet but are fictitious in nature and cannot be directly linked to acquisition of a particular asset, then such fictitious liabilities can be disclosed under the scheme as such without linking the same with the investment in any specific asset. FE

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