The Income Declaration Scheme (IDS) was a one-time tax amnesty scheme introduced by the Government of India under Chapter IX of the Finance Act, 2016. The scheme was created to address the persistent problem of black money and undisclosed income within the domestic economy. It provided a limited-time opportunity for individuals and entities to voluntarily disclose their previously undisclosed income and assets, thereby bringing them into the formal economy and boosting tax compliance.
The scheme was operational for a four-month period, from June 1, 2016, to September 30, 2016. Under the mechanism, a declarant was required to pay a total effective tax rate of 45% on the undisclosed income, which comprised a tax of 30%, a surcharge of 7.5%, and a penalty of 7.5%. The scheme offered significant benefits, including immunity from prosecution under the Income Tax Act, the Wealth Tax Act, 1957, and the Benami Transactions (Prohibition) Act, 1988. Furthermore, the declarations were guaranteed absolute confidentiality and were not subject to any scrutiny or inquiry. The scheme allowed for the payment of the total amount in three installments, with the final payment due by September 30, 2017.
The IDS, 2016, is connected to earlier initiatives like the Voluntary Disclosure of Income Scheme (VDIS) 1997 and was followed by the Pradhan Mantri Garib Kalyan Yojana, 2016. The scheme specifically targeted domestic undisclosed income and assets, excluding foreign assets or income to which the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 applied. The scheme was not replaced but was a one-time window; however, the rules were amended during its operation, such as the Income Declaration Scheme (Third Amendment) Rule notified vide CBDT Notification No. 74 dated August 17, 2016, which provided flexibility in valuing immovable property. The scheme resulted in 64,275 declarations with an aggregate of ₹65,250 Crore worth of undeclared incomes.