Vivad se Vishwas Scheme
Vivad se Vishwas (meaning 'Trust over Dispute') is a direct tax dispute resolution scheme introduced by the Government of India — first in 2020 (Direct Tax Vivad se Vishwas Act, 2020) and relaunched in 2024 — allowing taxpayers with pending income tax appeals to settle disputes by paying a specified percentage of the disputed tax demand, thereby extinguishing the penalty and interest liability.
The Vivad se Vishwas Scheme 1.0 was introduced by the Finance Minister in Budget 2020 and enacted through the Direct Tax Vivad se Vishwas Act, 2020. It was designed to address the massive backlog of income tax disputes pending before the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal (ITAT), and higher courts. At the time of announcement, over 4.83 lakh direct tax dispute cases involving over ₹9.32 lakh crore were pending across various appellate forums.
Under the 2020 scheme, taxpayers with pending appeals as of January 31, 2020 could settle by paying 100% of the disputed tax amount (or 125% if the appeal was filed by the income tax department). In return, the entire interest and penalty were waived. For cases involving only interest and penalty disputes (no tax dispute), a 25% payment sufficed. The deadline for payment was extended multiple times due to COVID-19 disruptions, ultimately closing in March 2021, with around ₹54,000 crore settled.
Budget 2024 announced Vivad se Vishwas Scheme 2.0, operationalised through the Finance (No. 2) Act, 2024. The new scheme extended the settlement window to disputes pending as of July 22, 2024. It introduced a tiered payment structure: taxpayers filing declarations before December 31, 2024 (new appellants) paid only 100% of disputed tax; those filing between January 1–March 31, 2025 paid 110% (for tax) or 30%/35% (for interest/penalty). A surcharge for 'older' appellants who had filed appeals before April 1, 2021 required a slightly higher payment.
The scheme covers disputes across all categories — regular assessments, search assessments, TDS defaults, and international tax disputes. Blocked accounts, cases under investigation for criminal offence, or cases involving undisclosed foreign assets are generally excluded. The scheme requires filing Form-1 (declaration), followed by the department issuing Form-3 (certificate of settlement amount), and then the taxpayer paying and filing Form-4 (withdrawal of appeal).
For equity investors and businesses with long-standing tax disputes — particularly around capital gains characterisation, LTCG vs. business income treatment, or transfer pricing adjustments — the Vivad se Vishwas Scheme offered a practical route to extinguish uncertain liabilities with certainty, free from interest and penalty accumulation.