Voluntary Disclosure of Income Scheme

Voluntary Disclosure of Income Scheme
Country	India
Closed	31 December 1997;27 years ago (1997-12-31)

The Voluntary Disclosure of Income Scheme (VDIS) was a very unconventional but successful step among Indian economic policies. ^[1] It would give an opportunity to the income tax or wealth tax defaulters to disclose their undisclosed income at the prevailing tax rates. This scheme would also ensure that the laws relating to economic offences would not be applicable for those defaulters. Over 350,000 people disclosed their income and assets under this scheme, which brought a revenue of ₹78 billion (US$920 million) to the Indian finance ministry. The scheme was closed on 31 December 1997. The Union Finance Minister P. Chidambaram hoped, "It is my faith that given a chance, the people of India (would) come clean of the black money."

Palaniappan Chidambaram, then Union Finance Minister

Purpose of the Scheme ^[2]

• To allow persons to declare undisclosed income of earlier years.
• Helps taxpayers regularize unreported income by paying tax at concessional rates.
• Only income can be disclosed — no disclosure of wealth allowed.

Who Can Disclose ^{[3] [4]}

A person may declare income that:

1. Was not disclosed in return under Section 139.
2. Was omitted from a return already filed before 1 July 1997.
3. Has escaped assessment for any assessment year, including FY 1997–98.

Tax Rates under VDIS ^{[5] [4]}

• 30% for individuals and others.
• 35% for companies and firms.
• Tax must be paid before filing declaration or within 3 months (with 2% simple interest per month).
• If tax not paid within 3 months, declaration becomes void.
• Tax once paid is non-refundable.

Restrictions / When Disclosure Not Allowed ^[3]

No disclosure allowed for:

• Assessment years where notice under Sections 142 or 148 was served and return was not filed before 1 July 1997.
• Year of search (Sec 132), requisition (Sec 132A), or survey (Sec 133A).
• Earlier years prior to search/requisition also barred.
• After survey (133A), barred only for that assessment year.

Treatment of Disclosed Income ^[3]

• Disclosed income not included in total income if:

1. It is credited in books/records and informed to AO.
2. Tax is fully paid within prescribed time.

Confidentiality ^[3]

• All particulars under VDIS are confidential.

Cannot be used as evidence for penalties or prosecution under:

1. Income Tax Act
2. Wealth Tax Act
3. FERA, 1973
4. Companies Act, 1956

Controversies ^[3]

VDIS granted income-tax defaulters indefinite immunity from prosecution under the Foreign Exchange Regulation Act, 1973, the Income Tax Act, 1961, the Wealth Tax Act, 1957, and the Companies Act, 1956 in exchange for self-valuation and disclosure of income and assets. ^[6] The Comptroller and Auditor General of India condemned the scheme in his report as abusive and a fraud on the genuine taxpayers of the country. ^[7]

References

1. Income Tax declaration, Circular. "Circular of Income Tax Declaration". vildirect.com.
2. "https://incometaxindia.gov.in/Communications/Circular/Others/910110000000000808/dtc44skp.htm". incometaxindia.gov.in. Archived from the original on 7 December 2024. Retrieved 24 November 2025.{{cite web}}: External link in |title= (help)
3. "Explanatory Notes on the Provisions of the Voluntary Disclosure of Income Scheme, 1997". incometaxindia.gov.in. Archived from the original on 7 December 2024. Retrieved 24 November 2025.{{cite web}}: |first= missing |last= (help)
4. "Income Declaration Scheme - All You Need to Know - Tax2win". tax2win.in. Archived from the original on 25 June 2025. Retrieved 24 November 2025.
5. "Income Declaration Scheme 2016 - Details, Rules and Tax Rate". cleartax. Retrieved 24 November 2025.
6. "Archived copy". Archived from the original on 3 March 2016. Retrieved 26 February 2015.
7. Cut your tax bill to just 2-3%