Budget Money Laundering Amendment to Hit Customs Clearances

Deficient "False" Declarations on Documents under Sec 132 of Customs Act may Land Traders in Jail under PMLA!

Concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable is punishment of rigorous imprisonment up to 10 years. The offense is now compoundable, that is, fine cannot substitute jail term. The offenders are not be permitted to approach the Settlement Commission. Penalty for concealment of income and assets at the rate of 300% of tax is proposed. These amendments are proposed in the PMLA (Prevention of Money Laundering Act), 2002.

Undervaluation or over valuation of imports and exports will be an offence under PMLA, Offences under Sec 132 in the Customs Act 1962 covering false declaration in documents submitted to customs are proposed to be listed in Part B of the PMLA. The freedom of trade to satisfy the requirements of buyers or get past irritants in the customs procedures is severely constrained the coverage under PMLA. The Inspector will now become even more powerful as unwary traders found deficient in documents will be threatened with PMLA.

Other Provisions: Non-filing of return or filing of return with inadequate disclosure of foreign assets will be liable for prosecution with punishment of rigorous imprisonment up to 7 years and income in relation to any undisclosed foreign asset or undisclosed income from any foreign asset will be taxable at 30% rate.  Exemptions or deductions which may otherwise be applicable in such cases, will also not be allowed.

The beneficial owner or beneficiary of foreign assets will be mandatorily required to file return, even if there is no taxable income. Agencies are seen as abettors of these offences. Thus, related whether individuals, entities, banks or financial institutions, will be liable for prosecution and penalty.

Date of Opening of foreign account will be mandatorily required to be specified by the assessee in the return of income.

Concealment of income or evasion of tax in relation to a foreign asset will be made a predicate offence under the Prevention of Money-laundering Act, 2002 (PMLA) and the provision would enable the enforcement agencies to attach and confiscate unaccounted assets held abroad and launch prosecution against persons indulging in laundering of black money.

The definition of ‘proceeds of crime’ under PMLA is also being amended to enable attachment and confiscation of equivalent asset in India where the asset located abroad cannot be forfeited.

Further, the Foreign Exchange Management Act, 1999 (FEMA) will also be amended to ensure if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of this Act, then action is  taken for seizure and eventual confiscation of assets of equivalent value situated in India- these contraventions are also being made liable for levy of penalty and prosecution with punishment of imprisonment up to five years.

For curbing the domestic black money, a new and more comprehensive Benami Transactions (Prohibition) Bill will be introduced in the current session of the Parliament.

The two boards, Central Board of Direct Taxes and the Central Board of Excise and Customs will co-ordinate and leverage technology to curb black money.