Surcharge Cess of 33% and 25% Forced Deposits (for PM Gharib Kalyan) to Launder Black Money

· Government Enters into 50:50 Deal with “Black Money” SBNs Holders to Compete with Money Launderers (They Launder for 80:20)

· 85% Cost if Money Found by ITO

· 75% Cost if Money Declared to ITO only

Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha

Bank notes of existing series of denomination of the value of Rs.500 and Rs.1000 [Specified Bank Notes (SBN)] have been recently withdrawn the Reserve Bank of India to “curb black money”.

Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

Legal way of painting black to white with PM Participating

The Ministry of Finance in a Press Note said that in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.

Water is without colour. It is neither black nor white. You add colour of your choice to it. It becomes colourful. But filter it through evaporation and condensation, it is without colour again.

Water does not have taste also. It is also transparent in liquid form, and invisible when vapourised. Yet the colourless and tasteless and invisible form is the medium which permeates nature and makes up the seas. Thus money is like water. It has no colour but is everywhere. Even He, the Modi is derived from Money. (Tailpiece: the market still accepts, and gives, the 1000 rupee Raghu note. The light red issue is still money, even though coloured blackest among the black by Modi).

Its money, mate. Liquid water, without colour.

Pradhan Mantri Garib Kalyan Yojana

In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

An overview of the amendments proposed in the Bill (passed by Lok Sabha) are placed below:

Overview of Amendments Proposed

Particulars	Existing Provisions	Proposed Provisions
General provision for penalty	PENALTY (Section 270A)	No changes proposed
	Under-reporting - @50% of tax
	Misreporting - @200% of tax
	(Under-reporting/ Misreporting income is normally difference between returned income and assessed income)
Provisions for taxation & penalty of unexplained credit, investment, cash and other assets	TAX (Section 115BBE) Flat rate of tax @30% + surcharge + cess	TAX (Section 115BBE) Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx.
	(No expense, deductions, set-off is allowed)	(No expense, deductions, set-off is allowed)
		PENALTY (Section 271AAC)
		If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.
Penalty for search seizure cases	Penalty (271AAB)	Penalty (271AAB)
	(i) 10% of income, if admitted, returned and taxes are paid	(i) 30% of income, if admitted, returned and taxes are paid
	(ii) 20% of income, if not admitted but returned and taxes are paid	(ii) 60% of income in any other case
	(iii) 60% of income in any other case
Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)	New Taxation and InvestmentRegime	Undisclosed income in the form of cash & bank deposit can be declared:
		(A) Tax, Surcharge, Penalty payable
		Tax @30% of income declared
		Surcharge @33% of tax
		Penalty @10% of income declared
		Total @50% of income (approx.)
		(B) Deposit
		25% of declared income to be deposited in interest free Deposit Scheme for four years.