In a massive clean up of legacy issues, nearly one-fifth of about 5 lakh entities locked in tax litigation with the government have opted for a dispute redressal scheme, helping settle around Rs 83,000 crore of contested amount, a top finance ministry official said on Sunday.

Finance minister Nirmala Sitharaman had in her budget for fiscal starting April 2020 announced a Vivad se Vishwas (VsV) Scheme to settle pending disputes relating to direct taxes. It was an attempt to release Rs 9.32 lakh crore blocked in around 4.8 lakh appeals pending at various appellate forums.

“Of the pending cases, 96,000 have opted for the scheme to settle about Rs 83,000 crore (of disputed tax),” finance secretary Ajay Bhushan Pandey said.

Considering the surge in VsV application that got filed in December 2020 and demands of taxpayers, he said the government has extended the scheme by a month till January 31.

Entities opting for the scheme have to pay requisite tax and litigations are closed and penal proceedings dropped.

“Under this exercise, more than Rs 1 lakh crore tax demands, which arose because of incorrect entries, have been cleaned up,” he said.

The litigation and appeal cases are before the Commissioner (Appeals) and tax tribunals to higher courts and in arbitration.

Once an entity opts for the VsV scheme and pays the due tax, the cases are deemed to have been withdrawn from the forums, interest, penalty and prosecution are also withdrawn.