In terms of the Voluntary Disclosure of Income Scheme, 1997, a person can make a disclosure in respect of unaccounted income, which has been invested in the form of jewellery and ornaments. The importance of voluntary disclosure of jewellery and ornaments lies in that once these become fully accounted for or declared, there is no problem with regard to income tax raids.

Another feature of making a disclosure of jewellery and ornaments in terms of VDIS '97 is that no bill, voucher, etc., is required to prove the date and source of investment in the form of jewellery. Likewise, a disclosure can be made in respect of jewellery of any make, size, weight, and by any person. The disclosure can be in the form of gold jewellery and any other jewellery, including jewellery made of precious or semi-precious stones.

Likewise, the disclosure in respect of Voluntary Disclosure of Income Scheme, 1997 can also be made only in respect of precious stones. For example, if a person possessed 20 pieces of diamond, he can make a disclosure of these 20 pieces in the form of precious stones. The problem of Gold Control Act, FERA, etc. will not be there in respect of disclosure made of jewellery, gold ornaments, precious stones, etc. Similarly, even jewellery made out of silver can be declared under the voluntary disclosure scheme.

Persons who are possessing unaccounted for jewellery and ornaments will find the new VDIS '97 a tax haven. An attractive feature of VDIS '97 is that income tax payable by individuals, and Hindu Undivided Families on disclosure of jewellery and ornaments is only 30 per cent. Moreover, this tax is payable on its purchase value. In comparison, if unaccounted or undeclared jewellery and ornaments are unearthed during an income tax raid, he would be required to make payment of income tax on surrender of such jewellery and ornaments @ 60 per cent of their present market value. Conversely, if a person were to take advantage of the Voluntary Disclosure of Income Scheme, 1997, he can declare his unaccounted for jewellery by making payment of income tax of only 30 per cent, and that also on the value of such jewellery at the time of its purchase.

Besides, if unaccounted jewellery, etc. is found at the time of income tax raid and a person does not make a surrender of the same due to heavy dose of income tax of 60 per cent on the present market value of the jewellery in which event the undisclosed amount of jewellery is added to the income of the assessee whereby not only income tax, penal interest and prosecution follow consequently.

The Gold Control Act provided for a restriction on holding gold jewellery up to a particular weight. However, the said provisions of Gold Control Act putting restrictions on the gold jewellery which a person can retain are not applicable at present. Hence, the Voluntary Disclosure now being made by a person will not violate any provisions of the erstwhile Gold Control Act. A person can keep with him any quantum of gold jewellery, diamond jewellery and other ornaments and jewellery because there is no upper limit on the quantum of gold jewellery that can be held by a person. However, what remains to be seen is that the jewellery, gold ornaments and other precious stones which are owned by a person should be duly accounted for and the person possessing such jewellery should have a provable source of investment in the jewellery. However, for persons not possessing any adequate proof or source of acquisition of the jewellery, the Voluntary Disclosure Scheme is really a tax haven. It is strongly recommended that every person, irrespective of the size of the family, current income, the income which he is showing year after year and also the withdrawals made by him for different years should take advantage of Voluntary Disclosure of Income Scheme, 1997 and make a true disclosure of all the unaccounted for gold ornaments and other jewellery owned by him.

Voluntary Disclosure of Income Scheme '97 and Tax Planning, 1997 -- R N Lakhotia & Subhash Lakhotia

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.