Finance ministry notifies direct tax Vivad Se Vishwas Scheme, 2024

The Union finance ministry on Thursday notified the Direct Tax Vivad Se Vishwas Scheme, 2024, which will come into effect on October 1.

This scheme will allow taxpayers to settle appeals, writ petitions, and special leave petitions pending in the Supreme Court, high courts, and appellate tribunals before the cutoff date of July 22.

Though the scheme’s operational date has been announced, the final date for the scheme is yet to be determined.

The scheme states if a taxpayer has a direct tax appeal pending before a commissioner, tribunal, high court, or Supreme Court, they can choose not to litigate and instead settle the appeal by paying the full tax amount, thereby waiving any interest and penalties. This applies to cases where the taxpayer has filed an appeal.

The scheme was brought for the first time in 2020, to facilitate settling direct tax appeals pending till January 31 that year, with the Commissioner of Income-Tax (Appeals), the Income Tax Appellate Tribunal, high courts, or the Supreme Court. At that time 483,000 appeals were pending, with Rs 4.96 trillion locked in these disputes.

Till now, there are 544,000 appeals just before the Commissioner of Income-Tax (Appeals) and the amount of disputed money has ballooned to Rs 10.6 trillion.

Union Finance Minister Nirmala Sitharaman, in her Budget speech in July, said: “While our concerted efforts to reduce the pendency of appeals at various appellate forums are beginning to show good results, it will continue to engage our highest attention.”

“With tax payment rates set to increase by 10 per cent starting January 1, 2025, it is crucial for companies to evaluate their pending income tax litigation from both a cost-benefit standpoint and a broader non-tax perspective. The rules and forms for VSV 2.0 have also been announced. Given the limited time window, an informed decision on opting for the scheme should be made promptly,” said Karishma R. Phatarphekar, partner, Deloitte India.

Transfer pricing (TP) is a significant issue in tax disputes among multinationals, leading to high-stakes demands. In transfer-pricing cases, there is a provision for secondary adjustment tax.


Scheme overview 

Pros
 

Reduces prolonged litigation
 

Provides certainty from tax and financial perspectives
 

Significant savings on litigation costs
 

Waives interest and penalties

 

Cons
 

No option for partial settlement of issues
 

Requires immediate cash outflow, potentially diverting resources from other budgeted expenses
 

Vivad Se Vishwas: 1.0 vs. 2.0

 

Scope
 

VSV 1.0 covered both appeals and cases where time limits for filing appeal had not lapsed; VSV 2.0 covers only pending appeals
 

VSV 2.0 excludes search cases

 

Source: Deloitte India