The Income Tax Department has introduced the Vivad Se Vishwas 2.0 scheme, allowing taxpayers to settle disputes for lower amounts if they file their declarations by December 31, 2024. This initiative, announced by Finance Minister Nirmala Sitharaman during her budget speech, aims to address pending appeals related to income tax disputes and will officially start on October 1, 2024.

Key Features of Vivad Se Vishwas 2.0
The scheme differentiates between ‘new appellants’ and ‘old appellants,’ offering reduced settlement amounts for those who act quickly. Taxpayers who file their declarations before the deadline will benefit from more favorable terms compared to those who file afterward, as stated by the Central Board of Direct Taxes (CBDT).

Four specific forms have been introduced to facilitate the process:

Form-1: For filing declarations and undertakings by the taxpayer.
Form-2: For certificates issued by the Designated Authority.
Form-3: For notifying payment by the taxpayer.
Form-4: For the final settlement order of tax arrears by the Designated Authority.
Each dispute will require a separate Form-1, unless both the taxpayer and the income tax authority have filed an appeal regarding the same order, in which case a single Form-1 will suffice.

Taxpayers must submit their payment notifications using Form-3, along with evidence of withdrawing appeals or claims. Forms 1 and 3 can be filed electronically.

A Step Towards Better Litigation Management
This scheme is part of the government's effort to manage litigation effectively. Currently, about 2.7 crore direct tax demands amounting to approximately ₹35 lakh crore are under dispute across various legal forums.

Deloitte India Partner Karishma R. Phatarphekar highlighted the importance of assessing pending income tax litigations, noting that tax payment rates under Vivad Se Vishwas 2.0 will rise by 10% starting January 1, 2025. Companies should carefully consider their options from both a financial and broader perspective.

With the introduction of this scheme and its associated rules and forms, taxpayers are encouraged to make informed decisions quickly, given the limited time frame to take advantage of the benefits offered.

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