The Rules and Forms associated with Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024 were notified on September 20, 2024, under Notification No. 104/2024, allowing for operational implementation of the Scheme.
The DTVSV Scheme, 2024 was introduced following an announcement in the Union Budget 2024-25 by Union Finance Minister Nirmala Sitharaman.
The Scheme is a continuation of the earlier Vivad Se Vishwas Scheme (2020), with an emphasis on offering lesser settlement amounts for taxpayers willing to settle their disputes earlier, particularly for those who file declarations by December 31, 2024. “While the Vivad Se Vishwas Scheme 2024 (“VSV Scheme”) is nearly identical to the Vivad Se Vishwas Act 2020 (“VSV Act”) with most parts of the latter being adopted in the former, the scope for interference by the High Court to grant reliefs to an assessee in certain exceptional circumstances is expected to remain the same,” said Rony Oommen John, Advocate on record, Supreme Court.
The strict procedural norms and timelines prescribed in the VSV Act were often relaxed by the jurisdictional High Courts, while acknowledging and encouraging the spirit of settlement.Rony Oommen John, Advocate on record, Supreme Court
He highlights, “Instances of this includes a case where the Allahabad High Court relaxed the strict timeline of 15 days for deposit of arrears of tax under the VSV Act, accepting an injury suffered the assessee as sufficient cause. Similarly, the Bombay High Court held an assessee eligible to apply under the VSV Act despite a pending prosecution against him, by interpreting “prosecution” to mean criminal cases related to the tax arrears under settlement, and not to any unrelated prosecutions.”The Vivad Se Vishwas (VsV) 2.0 Scheme has specific exclusions and will not apply to certain types of cases. such as search and seizure cases, where undisclosed income or assets have been identified. “One interesting modification in the VSV Scheme from the VSV Act is that the VSV Scheme has done away with the difference between non-search and search cases for the purposes of calculating the tax amount finally payable by the assessee,” said Rony Oommen John, Advocate on record, Supreme Court.
This reduces the ambiguities on this issue under the VSV Act and ensures a uniform approach for the settlement of all types of cases under the Income Tax Act 1961.Rony Oommen John, Advocate on record, Supreme Court
The scheme is effective from 01.10.2024, but the last date is yet to be notified.The Scheme distinguishes between ‘new appellants’ and ‘old appellants’, offering more favorable terms for the former. This approach incentivizes faster resolutions of disputes, benefiting taxpayers and reducing the backlog of pending appeals. “Taxpayers who file declarations by 31.12.2024 will only need to pay the disputed tax amount or 25% of disputed interest/penalty/fee, while those filing later will have to pay 110% of disputed tax or 30% of disputed interest/penalty/fee. In case of department appeal, the amount payable shall be one-half of the above amount determined. Further, those who had missed to opt for VSV in 2020 and the appeal is still pending before the same appellate forum can also opt now with additional costs,” said Nikhil Kabra, Partner, Ved Jain and Associates.
| Form-1 | Form for filing declaration and Undertaking by the declarant |
| Form-2 | Form for Certificate to be issued by Designated Authority |
| Form-3 | Form for Intimation of payment by the declarant |
| Form-4 | Order for Full and Final Settlement of tax arrears by Designated Authority |
He adds, “Form-1 is used for filing a declaration and undertaking by the taxpayer to resolve the dispute. After submission, the tax authorities issue Form-2, which details the settlement amount the taxpayer needs to pay. Once payment is made, the taxpayer must file Form-3 to provide proof of payment and withdrawal of the case from litigation. Form-4 is the final confirmation from authorities that the settlement is complete. By standardizing the process, these forms ensure clarity and efficiency in settling disputes.”
It will be advisable to assess the strength of each individual case. Cases involving penny stocks, accommodation entries through share capital, unsecured loans, bogus purchases, etc. can be settled through the scheme to save considerable time and money.Nikhil Kabra, Partner, Ved Jain and Associates
This scheme targets simplifying tax resolution while providing an avenue for taxpayers to resolve their disputes more efficiently, contributing to the government’s broader goal of tax reform. “If desirable to opt for the scheme, taxpayers shall file declarations as early as possible to take advantage of the lower settlement amounts available until 31.12.2024. Missing this deadline could significantly increase the costs,” said Nikhil Kabra, Partner, Ved Jain and Associates.
The Finance Act, 2024 generally applies to disputes and appeals pending before various forums as of July 22, 2024, according to the old tax laws. However, the act’s clarifications or interpretations may be applicable to these cases. For Dispute Resolution Panel (DRP) proceedings, the old tax laws continue to apply, and any subsequent assessment orders will also be governed by them. “VsV Scheme, 2024 enables eligible taxpayers to settle tax disputes pending as on July 22, 2024, thereby possibly reducing their tax exposure. Subject to certain exceptions, taxpayer (i) in whose case an appeal, writ petition or special leave petition is pending before appellate forums as on July 22, 2024; (ii) who has filed objections against the draft assessment order before the DRP and the DRP has not issued any directions on or before July 22, 2024; (iii) in whose case the DRP has issued directions but the tax officer has not passed the final assessment order on or before July 22, 2024; and (iv) whose revision application, filed under section 264 of the Income-Tax Act, 1961, is pending as on July 22, 2024, is eligible to apply under the VsV Scheme,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
The VsV Scheme, 2024 is largely similar to the VsV Scheme, 2020 in terms of how it applies, its process, and how disputes are settled. However, there are some cases that were included in the 2020 scheme but are not included in the new scheme. “VsV Scheme, 2024 does not envisage settlement of (a) proceedings for arbitration, conciliation or mediation under any law or international agreement; (b) cases where an assessment order is passed by the tax authority, or an appellate order is passed by the lower appellate authority, but the time limit for an appeal against such assessment or appellate order has not expired as on 22 July 2024; and (iii) settlement of cases where taxpayer has filed application for resolution under Mutual Agreement Procedure,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
He adds, “Though the aforementioned cases have not been expressly covered under the VsV Scheme 2024 for now, the taxpayer should watch out for any further clarification being issued by the tax authorities in this regard.”
The DTVSV Scheme also provides that Form-1 shall be filed separately for each dispute provided that where appellant and the income-tax authority, both have filed an appeal in respect of the same order, single Form-1 shall be filed in such a case. “Four forms have been notified for the purposes of the VsV Scheme, 2024. A taxpayer seeking to settle pending disputes under the VsV Scheme 2024, are required to make a declaration in Form-1, inter alia furnishing information about the dispute sought to be settled and the quantum involved.It may be relevant to note that a taxpayer would be obligated to file a separate Form 1 for each dispute sought to be settled under the Scheme,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
The intimation of payment is to be made in Form-3 and is to be furnished to the Designated Authority alongwith proof of withdrawal of appeal, objection, application, writ petition, special leave petition, or claim. Thus, “Upon receiving the declaration in Form 1 from the relevant taxpayer, the relevant tax authorities are required to issue a certificate, specifying the amounts of arrears payable by the taxpayer under the VsV Scheme in Form 2,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
Adding that, “Consequently, the taxpayer would be required to intimate the relevant tax authorities about the details of the payment of the tax arrears in Form-3, along with proof of withdrawing any pending appeals or legal proceedings. Both Form 1 and Form 3 will need to be submitted electronically on the Income Tax Department’s e-filing portal. Further, the order for full and final settlement of tax arrears by relevant authority needs to be issued in Form 4.”
The DTVSV Scheme also provides for lesser settlement amounts for taxpayers who file declaration on or before 31.12.2024 in comparison to those who file thereafter. Thus, “Taxpayers will face different settlement amounts depending on when they make their payments. Those who settle between October 1, 2024, and December 31, 2024, will benefit from lower settlement amounts compared to those who opt to settle on or after January 1, 2025. Therefore, it is essential for taxpayers to evaluate their situations carefully and make timely decisions regarding settlements to minimize their financial liabilities,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.
Additionally, taxpayers should explore other settlement options such as the e- Dispute Resolution Schemes, which can offer other alternative dispute resolution options and potential relief. Consulting with legal advisors about all available alternatives is highly recommended to ensure that taxpayers choose the best course of action for their specific situation.Kunal Savani, Partner, Cyril Amarchand Mangaldas
The VsV Scheme, 2024 does not allow taxpayers to participate if their assessment or reassessment was made after a search. This is different from the VsV Scheme, 2020, which allowed taxpayers to participate in search cases with disputed tax up to Rs.5 crores. “Cases where assessments or reassessments were made based on searches are no longer eligible, unlike VSV 2020, which allowed such cases with disputed tax of up to ₹5 crores,” said Pallav Pradyumn Narang, Partner, CNK.
The 2024 Scheme enables settlement of disputes pending as on 22 July 2024 under Income-tax Laws. “The scheme now applies only to cases where appeals are pending as of July 22, 2024. In VSV 2020, benefits could be availed even if appeals were not pending, provided the filing period had not expired,” said Pallav Pradyumn Narang, Partner, CNK.
Compare the cost of settling through the scheme versus continuing with litigation to make an informed financial decision.Pallav Pradyumn Narang, Partner, CNK.
The main goal of the Vivad Se Vishwas Scheme 2024 is to quickly resolve tax disputes and decrease the number of unresolved cases by offering taxpayers a chance to settle their legal issues by paying a portion of the disputed tax, interest, and penalties. “The scheme is structured to deliver timely relief to taxpayers and enhance the efficiency of tax administration,” said Aditya Chopra, Managing Partner, The Victoriam Legalis (TVL).
The scheme has notified four separate forms to be filed by a taxpayer. When filing for each dispute separately, Form – 1 is required. However, if both the Income Tax Authority and the appellant have filed appeals related to the same Order, a single Form – 1 can be submitted.Aditya Chopra, Managing Partner, The Victoriam Legalis (TVL)
He adds, “For payment notification, Form – 3 is necessary and should be provided to the Designated Authority along with evidence of withdrawal of Objection, Appeal, Writ Petition, Application, Special Leave Petition, or Claim Application. Both Form – 1 and Form – 3 should be electronically filed by the declarant from the Income Tax E-Filing Portal. Additionally, Form–4 is used for the Order for Full & Final Settlement of Tax Arrears by the Designated Authority.”
It’s important to note that taxpayers who did not opt for the 2020 Vivad se Vishwas scheme and are now opting for the current scheme will have to bear a heavier tax burden.Aditya Chopra, Managing Partner, The Victoriam Legalis (TVL)
The scheme is crafted to streamline tax dispute resolution, aiming to reduce the legal burden on courts and tribunals. “The scheme is designed to streamline dispute resolution, reduce the burden on the judicial system, and offer a clear path for taxpayers to close long-standing tax disputes at a lower cost,” said Anant Singh Ubeja, Senior Associate, SKV Law Offices.
Taxpayers can benefit by assessing the cost-benefit of using the scheme, especially considering the upcoming rate increase.Anant Singh Ubeja, Senior Associate, SKV Law Offices
Under the DTVSV 2024, taxpayers can resolve pending tax disputes at a lower cost, alleviating the burden on the judicial system. “They may also draw up a comparative analysis of if and how it will be beneficial, in terms of costs, time etc. It would ideally be in the best interest if it is availed as early as possible within the various stipulated cut off dates, since that will give the most efficient benefits where the taxpayer can get relief from the additional interests and penalties (also depending on the pendency status of the appeal),” said Ritika Nayyar, Partner, Singhania & Co.
The 2020 scheme garnered good response in its implementation. It’s a great mechanism to get disputes resolved timely and with minimum tax implications. One must surely take its benefits now that it’s been re-launched.Ritika Nayyar, Partner, Singhania & Co.
The earlier Vivad Se Vishwas scheme was introduced to address tax disputes that were already pending. This updated version streamlines the dispute resolution process, ensuring that new tax-related appeals, pending as of July 22, 2024, can be settled efficiently and at a lower cost for taxpayers. “According to the provisions of the updated scheme, taxpayers opting for settlement between 1st October 2024 and 31st December 2024 are obligated to pay either the entire disputed tax amount or 25% of the disputed interest, penalty, or fee. However, for those taxpayers who choose to settle after 31st December 2024, the required payment will increase to either 110% of the disputed tax amount or 30% of the interest, penalty, or fee in question,” said Sandeep Bajaj, Advocate, Supreme Court of India.
He adds, “Additionally, in cases where the department itself has filed an appeal, the settlement amount for the taxpayer will be reduced by half, offering a notable concession.”
The DTVSV Scheme provides for lesser settlement amounts for a ‘new appellant’ in comparison to an ‘old appellant’. “A distinctive feature of this new scheme is the differentiation between a ‘new appellant case’ and an ‘old appellant case’—the latter being appeals pending as of 31st January 2020. A taxpayer with an old appellant case will be subject to a higher settlement burden, with the payable amount exceeding that of a new appellant’s case by an additional 10%,” said Sandeep Bajaj, Advocate, Supreme Court of India.
This differentiation penalizes those with older appeals more heavily in comparison to new cases. In essence, while the earlier scheme may have offered more lenient terms, the new scheme imposes steeper penalties and higher settlement amounts, especially for older cases, making it evident that the window for a favorable resolution is shrinking as time progresses.Sandeep Bajaj, Advocate, Supreme Court of India.
Adithya Reddy, International Tax Lawyer said, “The difference between the new appellant as compared to the old appellant is that the old appellant is someone who has an appeal pending before an appellate forum and they choose to settle their dispute under the new scheme – in this case, the settlement amount for the old appellant would be higher than the new appellant.”
The taxpayer should use complete discretion over whether to take advantage of the Vivad se Vishwas program’s benefits and make a well informed choice. Before pursuing the plan, the taxpayer should do a cost-benefit analysis whether it is beneficial to settle under the scheme or not.Adithya Reddy, International Tax Lawyer
The DTVSV 2024 is aimed at clearing pending tax appeals and reducing litigation. It provides a structured path for taxpayers to resolve their disputes with the tax authorities at a reduced cost. To encourage early participation, the scheme offers lower settlement amounts for those who file declarations by December 31, 2024, offering significant savings to taxpayers who act promptly. “While the 2020 Vivad Se Vishwas Act was instrumental in resolving a substantial number of tax disputes and boosting government revenue, the ongoing challenge of litigation backlogs persists. The Direct Tax Vivad Se Vishwas Scheme 2024, with its emphasis on clearing pending appeals, offers a promising avenue to further reduce litigation. To incentivize early adoption, the DTVSV scheme offers lower settlement amounts for taxpayers who file declarations by December 31, 2024,” said Rishabh Malhotra, Counsel, DMD Advocates.
While the new scheme may not be a one-size-fits-all solution, it represents a step in the right direction and aligns with the government’s broader objective of enhancing ease of doing business in India.Rishabh Malhotra, Counsel, DMD Advocates
Starting from October 1, 2024, the Direct Tax Vivad Se Vishwas Scheme (DTVSV) 2024 will introduce updates to help reduce the backlog of pending tax litigation. The updated scheme will feature revised payment percentages across different categories, further lowering settlement costs for taxpayers who opt to resolve their disputes early. “In this the tax payer can pay a percentage of the disputed tax demand amount, subject to the stage of the proceedings. The new change from October 01, 2024 will be to reduce pending litigation backlog with updated payment percentage for different categories and lowering the settlement costs for tax payers,” said Alay Razvi, Partner, Accord Juris.
It will also aim are resolving disputes which are arising out of reassessment and appeals and timely resolution. In better words, administration cost can be reduced and litigation can be resolved. The tax payer will be saved from paying heavy penalty. The new forms have been launched under the new scheme for hassle free filing.Alay Razvi, Partner, Accord Juris
