In this article we will discuss about Voluntary Disclosure of Income Scheme, 1997 (VDIS).
The Government introduced Voluntary Disclosure Schemes at different times to unearth black money. This scheme was first introduced in 1951. Again the scheme was introduced in 1965 and then again introduced as per the recommendations of the Direct Tax Enquiry Committee.
Again as per the suggestions made by the National Development Council (NDC) meeting that the Government should think of a scheme to harness “black money” for productive purposes, the Budget for the year 1997-98 introduced a Voluntary Disclosure Scheme.
The scheme was a simple scheme where irrespective of year or the nature or the source of the funds the amount disclosed, either as cash securities or assets, whether held in India or abroad would be charged at the revised highest rate of tax. Interest and penalty would be waived. Immunity would be granted from any action under the Income tax. Wealth tax and the Foreign Exchange Regulation Act.
As per this scheme if any person who fulfils any two of these under-mentioned indicators viz:
(a) If a person subscribes to a telephone connection;
(b) Occupies an immovable property exceeding a specified floor area by ownership; tenancy or otherwise;
(c) Owns or has a leased motor vehicle; and
(d) Has travelled abroad or financed the foreign travel of any person during the last one year, and have never declared his taxable income in the past, he can now make use of the Voluntary Disclosure of Income Scheme ’97 by declaring income or wealth used for acquiring property/motor vehicle.
The VDIS ’97 offered the person a chance to declare undisclosed income of earlier previous years. Any such declaration made by the person under VDIS ’97 shall not be used against the person in any proceeding under the Income Tax Act (1961).
Wealth Tax Act (1957), FERA (1973) and the Companies Act (1956). Under the scheme no questions are asked and no harassment is made to the person concerned. VDIS ’97 fixed the lowest ever tax rate: 30 per cent for individuals and 35 per cent for corporate and firms.
The sale of commencement of the scheme was 1st July, 1997 and the scheme was scheduled to close on 31st December 1997. Of the total resources which can be secured under the scheme, a substantial part, i.e., 77.5 per cent will acquire to the state governments for infrastructural development and social sectors.
The share, which becomes available to the Central Government will go entirely towards financing the basic minimum services programme and infrastructure needs. Although the scheme was criticised from various corners but within the stipulated period, the scheme ended convincingly with a high degree of resounding success.
The VDIS, 1997 was able to net Rs 10,050 crore as additional revenue, on an undisclosed income of about Rs 33,000 crore, far exceeding the government expectations. Total number of declarants under the scheme was about 4,66,031. Thus about 4.66 lakh declarants had availed of the amnesty scheme which had helped in tapping a substantial chunk of the black money.
Thus VDIS ’97 has been able to unearth about Rs 33,000 crore of black money under the six monthly amnesty scheme, which could garner about one-third of the total unaccounted money in the country.
Although the UF Government had proposed earlier to devolve 77.5 per cent of the revenue collected up to December 1997 from the VDIS ’97 to the State Governments (which was roughly estimated to around Rs 4,379 crore) but the BJP led Government in its Interim Budget, 1997-98 proposed to double the amount to be devolved to the states from the VDIS collections.
As against the proposed devolution of Rs 4,379 crore during 1997-98 by the UF Government, the new Government led by BIP had gone a step further, proposing to devolve to states 77.5 per cent of VDIS collections for the full year, instead of till December 1997, amounting to Rs 7,594 crore.
Thus, although VDIS ’97 as a scheme to unearth black-money has been criticised as unethical and unproductive, but the scheme ended with a resounding success to unearth a good volume of black money and also to collect a good amount of additional revenue to be shared by both the Central as well as the State Governments.