Direct Tax Vivad Se Vishwas Scheme (2024): Clearing India’s Income Tax Litigation Backlog

Policy Update
Sandra Menon

Background

The Direct Tax Vivad Se Vishwas Scheme, 2024 was introduced by the Finance Minister, Nirmala Sitharaman in the Union Budget 2024-25 held on 23 July 2024. The Scheme was later put into law through Chapter IV which contains Sections 88 to 99 of the Finance (No. 2) Act, 2024. The rules and forms for this scheme were issued by the Central Board of Direct Taxes on 20 September 2024, and it came into force on 1 October 2024.

As per Circular No. 19 of 2024 of CBDT, the objective of this Scheme is to bring down the pendency of cases relating to income tax, faster realization of revenue for the government and providing relief to taxpayers from protracted legal process (Central Board of Direct Taxes, 2024).

The Direct Tax Vivad se Vishwas Scheme was launched because the number of cases kept growing. When the Direct Tax Vivad se Vishwas Scheme was first announced, 2.7 crore direct tax claims, worth about Rs. 35 Lakh crore were still pending in appellate courts. This substantial backlog pointed to the need for something more than traditional legal methods to solve pending tax disputes (ASC Group, 2024). The Direct Tax Vivad se Vishwas Scheme was similar to the Vivad se Vishwas scheme from four years ago. Then about 4.83 lakh direct tax cases, worth Rs. 9.32 Lakh crore were stuck in courts from the Commissioner (Appeals) up to the Supreme Court (Deccan Herald, 2020).

The 2024 Scheme is clearly a follow-up to the Direct Tax Vivad se Vishwas Act, 2020. It uses an approach. Offering a full and final settlement in exchange for the government waiving interest penalties and the threat of prosecution. When the 2020 scheme came to a close around 1.32 lakh declarations had been submitted. These covered disputed tax amounts totaling Rs. 98,328 Crore.

The government collected about Rs. 53,684 Crore from these declarations as noted in reports to the Lok Sabha, in March 2021 (Business Standard, 2021; CA Cult, 2021). Though the participation was substantial but incomplete, it was enough to prove that the methodology worked. This created not only a pragmatic platform but also a political pressure to bring back such a process in 2024.

Functioning

The 2024 Scheme covers appeals, writ petitions and special leave petitions that were still not decided by the Commissioner or Joint Commissioner (Appeals) the Dispute Resolution Panel, the Income Tax Appellate Tribunal, High Courts or the Supreme Court on the cut-off date of 22 July 2024. It also includes cases where objections were submitted to the Dispute Resolution Panel. There were no instructions available as yet in respect of revision cases filed under Section 264 of the Income-tax Act, 1961 (EY India, 2024).

Some types of disputes are not covered by the Scheme all. These include cases that come from search and seizure actions under Sections 132 or 132A of the Income-tax Act no matter how much tax is involved a rule than the one used in the 2020 Scheme for search cases. Also not included are matters where a criminal case has already started, cases involving money or property that’s not in India and assessments or reassessments that are based on information shared through a Double Taxation Avoidance Agreement (PwC India, 2024; Legal500 2024).

One special part of the 2024 Scheme is that it divides people who declare their cases into ‘old appellants and ‘new appellants. Old appellants are those whose cases were not decided by the group before or on 31 January 2020. New appellants are those whose cases started after that date. Old appellants must pay a share of the tax, interest or fine that is in question.

The amount that needs to be paid also depends on when the declaration was made. The first deadline had rates and the CBDT extended that deadline twice before it ended on 31 January 2025. After that date the rates went up by ten per cent for any declaration made before the Scheme ended (Lexology, 2024; BusinessToday, 2024). Table 1 shows how the 2024 Scheme is different, from the 2020 Scheme.

Table 1: Comparison of VSV 1.0 (2020) and VSV 2.0 (2024)

Note: Compiled from CA Cult (2021), Business Standard (2021) and PwC India (2024).

The Scheme uses four forms in order. First Form 1 is a declaration and undertaking that the taxpayer must file. Second Form 2 is a certificate from the Designated Authority that shows the amount that must be paid. Third Form 3 is the taxpayer’s notice of payment with proof that the original appeal or petition has been withdrawn. Fourth Form 4 is the order, from the Designated Authority that settles the matter completely.

A new Form 1 has to be filed for each dispute except when both the taxpayer and the tax authorities have appealed the order; then only one declaration is needed (ClearTax, 2026). The Central Government announced that 30 April 2025 would be the day to file new declarations. After that date the Scheme’s declaration window shut for good. Older declarations were still being processed by Designated Authorities up until 2025 and 2026 (TaxGarden, 2026).

Performance

Though there are structural similarities between the Scheme of 2024 and the Scheme of 2020, the results of the latter need to be used merely as a benchmark instead of performance, keeping in mind that official data with regard to the former is not available as yet. In the case of the Scheme of 2020, the government has been able to collect payments of around Rs. 53,684 crore out of a disputed tax of around Rs. 98,328 crore.

For VSV 2.0 the CBDT and the Finance Ministry had not yet released figures for the number of declarations filed, the disputed tax amount covered or the money collected under the Scheme unlike the regular Lok Sabha reports that came with the 2020 scheme. The only recent commentary available says that Designated Authorities in regions kept issuing Form 2 certificates and Form 4 settlement orders well after the 30 April 2025 deadline because many declarations were submitted in the last weeks of the scheme but no total participation number was given (TaxGarden, 2026). This lack of published, verifiable uptake data is a shortcoming in the Schemes transparency compared with its predecessor.

Official data does show that the backlog the Scheme was meant to reduce is still very large. Numbers released by the government in the Rajya Sabha for FY 2024-25 after the 2024 Schemes filing period ended, indicate that 5.39 lakh appeals worth Rs. 16.75 Lakh crore are still waiting before the Commissioner or Joint Commissioner (Appeals). There is also a backlog, before the Income Tax Appellate Tribunal, the High Courts and the Supreme Court (Taxscan, 2025). Table 2 lists this backlog in detail.

Table 2: Pendency of Income Tax Appeals Across Appellate Forums (FY 2024-25)

Note: Compiled from Taxscan (2025), based on data shared by the Minister of State for Finance in the Rajya Sabha.

Impact

For taxpayers who opted into the Scheme the main benefit has been finality. Once a taxpayer pays the amount decided the declarant gives a waiver of interest, penalty and protection from prosecution for the matter that has been settled. This stops litigation that could otherwise last years across many appellate levels. This certainty comes with a trade‑off. A taxpayer who has filed Form 3 cannot later leave the settlement to restart litigation even if a later court gives a favourable ruling in a similar case (TaxGarden, 2026).

For the government, voluntary settlement schemes like this give a way to collect money that would otherwise stay stuck in litigation for a time and the result of that litigation is uncertain. The 2020 scheme showed that more than half of the disputed tax declared was turned into collections in about a year after the scheme started. This highlights the possibility of the timing benefit of the plan, even though there is no information on the performance of the 2024 Scheme (Business Standard, 2021).

When looking at the size of pending cases the Scheme’s effect on the appellate system seems only partial, not a big change. Industry groups told the Finance Ministry in October 2025 long after the 2024 Scheme ended, that there were still 5.4 lakh appeals Rs. 18.16 Lakh crore waiting before the Commissioner (Appeals) alone. They asked for deadlines for case disposal. For filling a 40 per cent vacancy at that level (Business Standard, 2025). This shows that the main reasons for backlog in appeals, the lack of capacity, in the appeals system stayed mostly the same after the settlement window.

Emerging Issues

We often hear criticism about the treatment of “old” and “new” appellants. Since the Scheme is voluntary many commentators say that asking taxpayers to pay more for settlements when their appeals have been pending for a time is hard to justify. The length of pendency is usually due to limits in the system not to any wrongdoing by the taxpayer. The pressure to settle early can hurt taxpayers who otherwise have cases (NLIU Law Review, 2024).

The exclusions in the Scheme have also been criticized. The 2020 Scheme let search and seizure cases stay out only if the disputed tax was above a set threshold. The 2024 Scheme however excludes all search. Seizure cases no matter the value. This removes a category that normally includes high‑value, long‑pending disputes from the settlement path. Because of this the Scheme cannot reduce litigation as much as it could since many heavy disputes stay outside its scope (PwC India, 2024).

A third problem is not about the Scheme itself but about the institution. There is no timeline for deciding appeals before the Commissioner (Appeals) unlike the Income Tax Appellate Tribunal, which has a sixty‑day rule that can be extended by thirty days. Practitioners say that this imbalance drives the backlog. They argue that settlement schemes are a relief valve for the pile‑up, not a fix for the root cause of slow processing (Outlook Money, 2025).

Lastly, the finality offered by the Scheme is one of its major strengths for the government. It also means that taxpayers who settle have no way to fight again if the law later changes to help them on a similar issue. This trade‑off is normal, for any settlement. Taxpayers must think carefully about it compared to the uncertainty that comes with staying in litigation (TaxGarden, 2026).

Way Forward

The following priorities emerge as central to strengthening both this Schemes transparency and the litigation management framework it is intended to support.

1. Publish consolidated uptake data: The CBDT and the Finance Ministry should publish periodic Lok Sabha-style disclosures on the number of declarations filed disputed tax covered and revenue realised under VSV 2.0 as was done for the 2020 scheme. This would allow assessment of its performance instead of relying on retrospective unofficial estimates.

2. Introduce statutory disposal timelines at the CIT(A) level: Adopting a sixty-plus-thirty-day pronouncement rule to that applied by the Income Tax Appellate Tribunal would help prevent ongoing pendency before the Commissioner (Appeals) from continuing to be the main driver of future litigation growth.

3. Address vacancies in the cadre: Filling the reported vacancy gap at the Commissioner (Appeals) level would increase disposal capacity in a way that does not depend on the recurrence of amnesty-style settlement windows.

4. Calibrate future scope exclusions: A graded threshold-based approach to excluding search and seizure cases to the method used in the 2020 scheme would allow broader participation in any future edition without undermining scrutiny of the most serious disputes.

5. Reconsider the appellant payment differential: Given the voluntary nature of the Scheme the higher burden placed on old appellants warrants review especially when prolonged pendency reflects systemic delay at the appellate level rather than misconduct by the taxpayer.

6. Institutionalise settlement as a recurring instrument: Instead of announcing settlement windows intermittently embedding a structured and predictable periodicity, within the broader litigation management framework would allow both taxpayers and the tax administration to plan accordingly rather than reacting to one-off announcements.

References

1. ASC Group. (2024, December 18). Vivad Se Vishwas Scheme 2024 – Latest notification. https://www.ascgroup.in/vivad-se-vishwas-scheme-2024/
2. Business Standard. (2021, March 8). Vivad se Vishwas scheme collected Rs 54,000 cr till March 1: MoS Finance. https://www.business-standard.com/article/economy-policy/vivad-se-vishwas-scheme-collected-rs-54-000-cr-till-march-1-mos-finance-121030801109_1.html
3. Business Standard. (2025, October 28). FICCI pre-Budget 2026: Tax reforms, TDS rationalisation, fast-track demerger. https://www.business-standard.com/finance/news/ficci-pre-budget-2026-tax-reforms-tds-rationalisation-fast-track-demerger-125102801306_1.html
4. BusinessToday. (2024, December 31). Vivad Se Vishwas Scheme 2024: CBDT sets new deadline on Jan 31, 2025; check details for settling tax disputes. https://www.businesstoday.in/personal-finance/tax/story/vivad-se-vishwas-scheme-2024-cbdt-sets-new-deadline-on-jan-31-2025-check-details-for-settling-tax-disputes-459162-2024-12-31
5. CA Cult. (2021, March 8). Disputes amounting to Rs. 98,328 crore are resolved under VSVS. https://cacult.com/disputes-amounting-to-rs-98328-crore-are-resolved-under-vsvs/
6. Central Board of Direct Taxes. (2024, December). Circular No. 19 of 2024: Direct Tax Vivad Se Vishwas Scheme, 2024. Government of India. https://www.incometax.gov.in/iec/foportal/sites/default/files/2024-12/circular-19-2024.pdf
7. ClearTax. (2026, March 5). Vivad Se Vishwas Scheme 2024 income tax: Start date, eligibility, how to apply, and required forms. https://cleartax.in/s/direct-tax-vivad-se-vishwas-scheme
8. Deccan Herald. (2020, March 4). Lok Sabha passes direct tax Vivaad Se Vishwas Bill. https://www.deccanherald.com/amp/story/india%2Flok-sabha-passes-direct-tax-vivaad-se-vishwas-bill-810500.html
9. EY India. (2024, July). Key highlights of Vivad Se Vishwas Scheme, 2024. https://www.ey.com/en_in/technical/alerts-hub/2024/07/key-highlights-of-vivad-se-vishwas-scheme-2024
10. Legal500. (2024). Direct Tax Vivad se Vishwas Scheme, 2024 – Legal developments. https://www.legal500.com/developments/thought-leadership/direct-tax-vivad-se-vishwas-scheme-2024/
11. Lexology. (2024, November 21). Dispute settlement: Decoding Vivad se Vishwas Scheme 2.0. https://www.lexology.com/library/detail.aspx?g=c9787dce-e834-418e-bf4f-9e5c68fdc157
12. NLIU Law Review. (2024, October 28). Tax disputes simplified: A critical look at the Vivad Se Vishwas Scheme, 2024. https://nliulawreview.nliu.ac.in/blog/tax-disputes-simplified-a-critical-look-at-the-vivad-se-vishwas-scheme-2024/
13. Outlook Money. (2025, March 13). Taxpayers in limbo: Over 5 lakh appeals pending before CIT-A, tax practitioners call for early disposal. https://www.outlookmoney.com/tax/taxpayers-in-limbo-over-5-lakh-appeals-pending-before-cit-a-tax-practitioners-call-for-early-disposal
14. PwC India. (2024, October 3). Direct Tax Vivad se Vishwas Rules, 2024. Tax Insights. https://www.pwc.in/assets/pdfs/news-alert/tax-insights/2024/pwc_india_tax_insights_3_october_2024_direct_tax_vivad_se_vishwas_rules_2024.pdf
15. TaxGarden. (2026, August). Direct Tax Vivad se Vishwas 2024: Complete guide. https://taxgarden.in/blog/direct-tax-vivad-se-vishwas-dtvsv-scheme-2024-guide-india
16. Taxscan. (2025, December 12). Over ₹25 lakh crore locked up in income-tax disputes across appellate levels, Centre shares data. https://www.taxscan.in/top-stories/over-25-lakh-crore-locked-up-in-incometax-disputes-across-appellate-levels-centre-shares-data-1439857

About The Contributor

Sandra Menon is a Research and Editorial Intern at IMPRI and a first-year Master’s student in Public Policy at M.O.P. Vaishnav College for Women, Chennai. Her academic interests lie in public policy and governance.

Acknowledgement

The author extends sincere thanks to the IMPRI team for their guidance.

Reviewers: Anamika P K & Ninchen Tamang

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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