In today’s tax-driven landscape, many tax cases are waiting to be resolved in various appellate courts and tribunals. To address this issue, the Government launched a scheme in 2020 called the Direct Tax Vivad Se Vishwas Act 2020. This scheme, commonly known as the ‘Vivad Se Vishwas scheme,’ aimed to reduce the number of ongoing tax disputes in courts and tribunals. As a result, a large number of these cases were successfully settled.
The scheme was very well received by taxpayers, with many choosing to participate. Due to the success of the 2020 scheme, the Government has introduced a new version called ‘The Direct Tax Vivad Se Vishwas Scheme, 2024.’ This new scheme was included in the Finance (No. 2) Bill 2024, which later became the Finance (No. 2) Act 2024.
History of Vivad Se Vishwas Scheme
The Vivad Se Vishwas Scheme significantly reduces tax litigation and settles disputes. It was first introduced by the Government in 2020 to help taxpayers resolve pending tax cases by offering them a chance to settle their tax demands at a reduced liability. The scheme was a major success, with nearly 1 lakh taxpayers opting to use it. As a result, the government collected approximately Rs. 75,000 crores.
Encouraged by the success of the original scheme, the government introduced a new version called Vivad Se Vishwas 2.0. This updated scheme is designed to settle a much larger number of tax disputes, targeting around 2.7 crore pending direct tax cases worth a total of approximately Rs. 35 lakh crore.
In her remarks, Finance Minister Nirmala Sitharaman highlighted that Vivad Se Vishwas 2.0 is part of a broader initiative to simplify taxes, enhance services for taxpayers, and reduce litigation while also boosting government revenue. The second version of the scheme focuses on addressing more complex and high-value disputes, further streamlining the resolution of longstanding tax issues.
Eligibility Criteria
If you have any pending income tax disputes or appeals as of July 22, 2024, you are eligible to participate in the Vivad Se Vishwas 2.0 scheme. The types of cases that qualify for the scheme include:
- Cases pending in the Supreme Court, high courts, the Income Tax Appellate Tribunal (ITAT), or before the Commissioner/Joint Commissioner (Appeals).
- Disputes under review by the Dispute Resolution Panel (DRP).
- Revision petitions awaiting decisions from the Commissioner of Income Tax.
How Much Tax Do I Have to Pay?
The amount you need to pay to settle your tax dispute under the Vivad Se Vishwas 2.0 Scheme depends on the timing of your payment:
- If you settle between October 1, 2024 and December 31, 2024.
- You only need to pay the disputed tax amount.
- Alternatively, if the dispute is about interest, penalties, or fees, you only have to pay 25% of the disputed amount.
- If you settle after December 31, 2024:
- You will need to pay 110% of the disputed tax.
- For disputes about interest, penalties, or fees, you will be required to pay 30% of the disputed amount.
In cases where the tax department has filed the appeal, the amount you owe will be reduced by 50%.
What’s Not Covered under Vivad Se Vishwas 2.0?
While the Vivad Se Vishwas Scheme 2024 is similar to the 2020 version, certain cases that were included earlier are now excluded. Here’s what is not covered under the new scheme:
- Search and Seizure Cases
Unlike the 2020 scheme, which included search assessments up to Rs 5 crore, the 2024 scheme excludes search cases entirely.
- Disputes Involving Arbitration, Conciliation, or Mediation
Any tax disputes related to arbitration, conciliation, or mediation are not eligible.
- Cases Where the Appeal Deadline Hasn’t Passed
If an assessment or appellate order was issued but the appeal deadline had not yet passed by July 22, 2024, these cases cannot be settled under the scheme.
- Mutual Agreement Procedure (MAP) Cases
Disputes settled through the Mutual Agreement Procedure for resolving tax disputes between countries are excluded.
- Undisclosed Foreign Income or Assets
Cases involving undisclosed foreign income or assets are not eligible for settlement.
- Cases Involving Prosecution
If the tax dispute involves prosecution, it is also excluded from this scheme.
What are the Forms Used Under the Scheme?
Here is a list of the forms used under the scheme (Vivas se Vishawas).
- Form-1
Form-1 is the initial document that taxpayers need to fill out when participating in the Vivad Se Vishwas 2.0 scheme. In this form, taxpayers provide all the necessary information related to their tax disputes and formally agree to settle these disputes. It includes details about the nature of the dispute, the amounts involved, and any other relevant information that helps the authorities understand the case. By submitting Form-1, taxpayers take the first step toward resolving their issues and show their intention to settle without prolonged litigation.
- Form-2
Once the Designated Authority (DA) receives Form-1, they review the information provided and issue Form-2 within 15 days. Furthermore, the certificate is crucial because it outlines the exact amount the taxpayer needs to pay to settle their dispute. It provides clarity on the financial obligations involved and serves as an official acknowledgment of the dispute’s details. Form 2 ensures that taxpayers know precisely what they owe, which helps streamline the settlement process and reduces confusion.
- Form-3
After the taxpayer has made the required payment as specified in Form-2, they must complete Form-3. This form notifies the Designated Authority (DA) that the payment has been made. By submitting Form-3, the taxpayer confirms their compliance with the terms of the settlement and provides evidence that the payment has been completed. It is important to maintain clear communication with the DA and ensure that all necessary documentation is in order.
- Form-4
Finally, after the taxpayer submits Form-3, the Designated Authority issues Form-4. This form represents the final order confirming that the settlement is complete. Once the taxpayer has made the payment, Form 4 effectively concludes the case, which indicates that no further legal action can be taken regarding the dispute.
Important Factors to keep in mind about Vivad Se Vishwas 2.0
Here is a list of factors to consider regarding Vivad se Vishwas 2.0. Let’s discuss them in detail.
- Non-Refundable Payments
One of the major factors to remember is that any amount paid under the Vivad Se Vishwas 2.0 scheme is non-refundable. However, taxpayers may be eligible for a refund of any excess tax paid under the Income Tax Act if the payment exceeds the disputed principal tax, interest, penalty, or fee calculated under the scheme. It is important to note that no interest will be provided by the government on such excess tax refunds.
- Withdrawal of Appeals
Another major factor to keep in mind is that once a taxpayer’s declaration is accepted under this scheme, they are required to withdraw any pending appeals or writ petitions related to their case. This withdrawal must be accompanied by proof, which should be submitted to the Designated Authority (DA) along with the payment notification.
- No Precedent Set
There is no denying the fact that it is explicitly stated that any case settled through the Vivad Se Vishwas 2.0 scheme will not serve as a precedent for other tax proceedings involving similar issues for that taxpayer. Thus, it means that each case is treated independently, and settling one dispute does not influence future disputes.
- Eligibility and Scope
Another major factor to keep in mind is that the scheme applies to various types of pending disputes, including those in higher courts and tribunals as of July 22, 2024. Furthermore, taxpayers can settle their disputes at reduced liabilities, making this an attractive option for those looking to resolve outstanding tax issues efficiently.
- Early Declaration Benefits
Last but not least, taxpayers are encouraged to file their declarations early, as those who do so by December 31, 2024, may benefit from lower settlement amounts compared to those who file later. This incentivizes prompt action and can lead to significant savings.
Final Thoughts
So, there you have it! That’s a wrap to everything you need to know about Vivad se Vishwas 2.0. Tax litigation can be a significant burden, which may lead to not only financial costs but also consume valuable time, resources, and energy for taxpayers. The Vivad Se Vishwas 2.0 scheme presents a welcome opportunity for taxpayers to achieve closure on pending tax disputes efficiently.
