Vivad se Vishwas scheme 2020

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The tax system is the government’s largest source of income. Tax revenue is used for various projects for the development of the nation by the government. Taxation in India is well structured and consists of different levels.

The Indian tax system is well structured and has a three-tier federal structure. The tax structure consists of the central government, state governments, and local municipal bodies.

India’s central government imposes several taxes such as customs duties, central excise duties, income taxes, and service taxes. The state government collects several types of taxes, including farm income taxes, state excise taxes, professional tax, land revenue tax, and stamp duty. On services such as water and drainage supply, local governments are allowed to collect octroi and property tax.

An income tax is a tax imposed on individuals or entities on the basis of their income or profits. Generally, income tax is computed by multiplying the tax rate by the taxable income. There may be variations in tax rates according to the taxpayer’s characteristics and the income being received. 

Income tax in India is governed by Entry 82 of the Union List of the Seventh Schedule to the Constitution of India, empowering the central government to tax non-agricultural income; agricultural income is defined in Section 10(1) of the Income-tax Act, 1961. The Income Tax Department is the central government’s largest revenue generator; total tax revenue increased from ₹1,392.26 billion (US$20 billion) in 1997–98 to ₹5,889.09 billion (US$83 billion) in 2007–08. In 2018–19, direct tax collections reported by the CBDT were about 11.17 lakh crore (₹1.117 trillion).

Income tax dispute resolution in India is multi-layered and time-consuming, which negatively affects doing business in India. Tax appeals in India are handled by the Supreme Court of India, which has an extensive jurisdiction. The system, however, can be abused. In the present dispute resolution procedure, tax appeals filed by the income tax department are the most common.

The Indian Government, to clear the backlog of appeals, has launched a direct tax litigation settlement scheme named the ‘Direct Tax Vivad Se Viswas Scheme’ (VSV scheme) on March 17, 2020. The ‘VSV scheme’ provides taxpayers with an option to put a full stop to the entire litigation process and achieve finality merely by paying the tax component of the dispute. The Indian Government shall waive penalty and interest, and is offering a 50 percent discount to settle revenue appeals and appeals where the taxpayer has a favourable precedent by a higher court. An important aspect is that the ‘VSV scheme’ is not an amnesty scheme and explicitly clarifies that availing this option shall have no precedence value qua the principal issues. Thus, taxpayers can decide to settle their appeals based on an objective comparison of future litigation costs with the cost of availing the settlement option.“The last date of payment under ‘Vivad se Vishwas Direct Tax 2020 (without additional amount) was extended to 30th September 2021 and with the additional amount the due date is 31st October 2021.”

With respect to the matters covered in the declaration, the taxpayer is immune from interest, penalties, and prosecution for any offence under the Income-tax Act.

LTA VOUCHER SCHEME WOULD BE TAXED

The government announced various relief measures for paid taxpayers during the first wave of COVID-19 in 2020. The ability to claim a tax exemption on their Leave Travel Allowance (LTA) balance was one of them.

In most cases, taxpayers can claim a tax benefit on LTA for a vacation they took anywhere in India. Taxpayers, on the other hand, were unable to travel due to the pandemic and occasional lockdowns. They may be required to pay tax on the LTA component of their salaries in such instances. The government announced an LTA cash voucher programme to help salaried taxpayers avoid this dilemma. This scheme has been notified on May 5,2021.

What is the LTA cash voucher scheme?

Those with an LTA component in their wage can save tax on taxes by spending a “determined amount” on particular goods without having to travel under the LTA cash voucher programme, which is in effect for FY 2021-21.

Let’s take a closer look at how this system works. The’sepcified expense’ should have been incurred by the taxpayer or a member of his or her family. It should have been used to buy goods and services having a GST rate of at least 12 percent. Between October 12, 2020 and March 31, 2021, the transaction should have been done. Furthermore, the exemption cannot exceed Rs 36,000 per person or one-third of the’specified expenditure,’ whichever is smaller. Payment for the costs should have been made to a GST-registered firm via electronic methods, with a ‘GST tax invoice’ available.

LTA can usually be claimed as exempt twice in a four-year period, with the current period running from 2018 to 2021. Using the LTA plan would entitle you to one of the four trips in the four-year period. As a result, taxpayers can only use this option once during the four-year period between 2018 and 2021.

How can one claim this exemption?

Employers are required by law to subtract TDS from your wage before paying you. TDS would have been withheld from your salary income for FY 2020-21 by your employer. Because the LTA voucher programme was not announced at the time they were needed to deduct TDS for FY 2020-21, several employers were unable to accept it. If you haven’t been able to take advantage of the LTA plan through your company, you can do so while completing your income tax return. Make sure you complete all of the requirements and properly report the LTA exemption you wish to claim on your income tax return. You should also keep all supporting documents, such as the tax invoice and payment evidence. You will be eligible to claim a refund of TDS deducted on the LTA amount if you utilise this scheme while completing your return (as per the eligibility criterion specified above).

Most employers would have already deducted TDS from your LTA balance and paid it to you as salary in FY 2020-21, or permitted you to carry the LTA balance forward to the next financial year for filing a claim. Also, it will not be qualified for this programme under the new tax framework.

Provided you purchased a cellphone, an air conditioner, or a refrigerator during the designated time, you may be eligible to claim your LTA as exempt if you meet all of the conditions given above, as all of these items are subject to a GST rate of 12% or more.