🌟 CBDT Updates Rules on the “Voluntary Felicity Scheme” (Vivad se Vishwas Scheme 2024)

Introduction

The Central Board of Direct Taxes (CBDT) has updated the rules related to the Direct Tax Vivad Se Vishwas Scheme, 2024, also referred to informally as the “Voluntary Felicity Scheme.” This revamped version is aimed at encouraging swift resolution of income tax disputes through concessional payments, simplified procedures, and clear eligibility benchmarks. Here’s a comprehensive overview of the new legal framework.

1. Background & Rationale 🏛️

• Origins: Launched via the Finance (No. 2) Act, 2024, the scheme became effective from 1 October 2024. It targets the resolution of pending tax disputes and aims to reduce the burden on courts while boosting voluntary compliance.

• Purpose: Offers taxpayers a way to declare and settle disputes at lower rates—leading to reduced litigation, faster revenue realization, and administrative efficiency.

2. Key Dates & Timelines 📅

• Specified Cut-Off Date: Applies to appeals, SLPs, and writs pending as of 22 July 2024, regardless of whether they are later withdrawn or resolved.

• Declaration Timelines:

  • Up to 31 December 2024 – Lower settlement rates apply.

  • From 1 January to 31 January 2025 – Higher rates become applicable.

  • From 1 February 2025 onwards – Highest settlement rates kick in.

3. Eligibility Criteria: Who Can Opt In ✅

Eligible Appeals and Applications:

• Appeals pending as of 22 July 2024 (even if decided later).

• Appeals with condonation of delay admitted before or on 22 July 2024.

• Intimation-based appeals under Section 143(1).

• Revision applications under Section 264 pending as of the cut-off date.

Ineligible Cases:

• Where prosecution was already initiated before the declaration.

• Matters involving foreign information under Sections 90/90A (if such data was used in assessment).

• Review petitions in higher courts (not counted as appeals).

• Proceedings under the Income-Tax Settlement Commission.

• Cases involving:

  • Undisclosed foreign assets

  • Search and seizure operations (Sections 132/132A)

  • Assessments under Sections 143(3), 147, 153A/153C

• Mixed disputes containing ineligible elements (e.g., equalization levy) disqualify the entire claim.

4. Forms & Procedural Flow 📋

The Scheme requires a standardized four-step form process:

Note: Late declarations beyond 31 January 2025 will attract higher settlement rates and no additional surcharge relief.

5. Computation: How the Settlement Amount Is Determined 💰

• Disputed Tax is calculated as of 22 July 2024, regardless of whether the case was later resolved or withdrawn.

• In case of loss or depreciation adjustments:

  • Pay tax (plus cess and surcharge) on the reduced figure and carry forward the rest.

  • Alternatively, waive the right to claim the disallowed portion again.

• Rate Tiers:

  • Lower rates apply for declarations by 31 December 2024.

  • Mid-tier rates for declarations from 1 to 31 January 2025.

  • Highest rates apply from 1 February 2025 onward.

6. Legal Safeguards & Compliance ⚖️

• No Prosecution: Taxpayers already under prosecution cannot file under the scheme.

• Unified Disclosure: All disputes across years must be declared together.

• Strict Compliance: Deadlines are sacrosanct—delayed submissions are not allowed.

• Transparency: Taxpayers are advised to confirm eligibility thoroughly before filing.

7. Benefits of the Scheme

• Litigation-Free Closure: Reduced legal costs and faster resolution.

• Financial Relief: Lower tax outgo versus contested tax plus interest.

• Certainty: Final closure through Form 4—no further disputes on same issue.

• Peace of Mind: Eliminates prolonged tax litigation stress.

8. Practical Impacts & Caution Points 🧭

For Taxpayers & Professionals:

• Ensure appeal was pending as of 22 July 2024.

• Verify the case isn’t ineligible (e.g., search-based, foreign undisclosed income).

• Time the declaration wisely to maximize financial benefit.

• Maintain proper records—submissions, acknowledgments, deposits, etc.

For Tax Authorities:

• Adhere to timelines (Form 2 within 15 days, etc.).

• Promptly reject incomplete or ineligible declarations.

9. FAQs – Quick Clarifications

• Q: Are revision applications under Section 264 covered?

  • A: Yes, if pending on or before 22 July 2024.

• Q: What if prosecution begins after filing Form 1?

  • A: No problem—only prosecutions initiated before declaration filing disqualify the taxpayer.

• Q: Appeal got decided after filing—am I still eligible?

  • A: Yes, it’s treated as if pending on 22 July for the scheme's purposes.

• Q: What if dispute involves both eligible and ineligible tax?

  • A: Entire dispute becomes ineligible—no partial resolution permitted.

10. Case Study ✨

Taxpayer A had an appeal pending as of 18 July 2024, involving ₹10 lakh disputed tax.

• Filed Form 1 on 20 December 2024 → Eligible for concessional settlement at ₹8 lakh.

• Received Form 2 within 15 days.

• Paid and submitted Form 3.

• Form 4 issued—case settled fully and finally.

If Form 1 was filed on 15 January 2025 instead, settlement would be ₹9.5 lakh; post-31 Jan filing would incur highest payable rates.

Conclusion

CBDT’s updated Vivad Se Vishwas Scheme (2024) strikes a balance between procedural clarity and financial incentive. Taxpayers with eligible disputes pending as of 22 July 2024 have a limited-time opportunity to settle cases at reduced rates. Timely filing—especially Form 1 before 31 December 2024—is key to availing the best terms. The scheme is a practical tool for those seeking litigation-free resolution and finality in tax matters..