Tough Black Money
Bill Imposes 120% Burden on Money Outside India
Its Better to be a Non-Indian
these Days!
Highlights of the Undisclosed Foreign Income and Assets
(Imposition of Tax) Bill, 2015 Introduced in Lok Sabha on 20 March
The Finance Minister, in his
budget speech, while acknowledging the limitations under the existing law, had
conveyed the considered decision of the Government to enact a comprehensive new
law on black money to specifically deal with black money stashed away abroad.
He also promised to introduce the new Bill in the current Session of the
Parliament.
The Undisclosed Foreign Income
and Assets (Imposition of Tax) Bill, 2015 was introduced in the Parliament on
20.03.2015. The Bill provides for separate taxation of any undisclosed income
in relation to foreign income and assets. Such income will henceforth not be
taxed under the Income-tax Act but under the stringent provisions of the
proposed new legislation.
The salient features of
the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 are as
under:-
Scope
The Act will apply to all persons resident in India. Provisions of the Act will
apply to both undisclosed foreign income and assets (including financial
interest in any entity).
Rate of
tax Undisclosed foreign income or assets shall be taxed at the flat rate of
30 percent. No exemption or deduction or set off of
any carried forward losses which may be admissible under the existing
Income-tax Act, 1961, shall be allowed.
Penalty plus tax to be more
than the Undisclosed income
The
penalty for non-disclosure of income or an asset located outside India will be
equal to three times the amount of tax payable thereon, i.e., 90 percent of the undisclosed income or the value of the
undisclosed asset. This is in addition to tax payable at 30%.
Failure
to furnish return in respect of foreign income or assets shall attract a
penalty of Rs.10 lakh. The same amount of penalty is prescribed for cases where
although the assessee has filed a return of income,
but he has not disclosed the foreign income and asset or has furnished
inaccurate particulars of the same.
Prosecutions Rigorous
Imprisonment for 3-10 years Plus Fine
The punishment for willful attempt to evade tax in relation to a foreign
income or an asset located outside India will be rigorous imprisonment from
three years to ten years. In addition, it will also entail a fine.
No Return, Abetment to Offence
means RI for 6 months
Failure to furnish a return in
respect of foreign assets and bank accounts or income will be punishable with
rigorous imprisonment for a term of six months to seven years. The same term of
punishment is prescribed for cases where although the assessee
has filed a return of income, but has not disclosed the foreign asset or has
furnished inaccurate particulars of the same.
The above provisions will also
apply to beneficial owners or beneficiaries of such illegal foreign assets.
Abetment or inducement of
another person to make a false return or a false account or statement or
declaration under the Act will be punishable with rigorous imprisonment from
six months to seven years. This provision will also apply to banks and
financial institutions aiding in concealment of foreign income or assets of
resident Indians or falsification of documents.
Provision for Natural Justice,
Appeal to ITAT
Safeguards The principles of
natural justice and due process of law have been embedded in the Act by laying
down the requirement of mandatory issue of notices to the person against whom
proceedings are being initiated, grant of opportunity of being heard, necessity
of taking the evidence produced by him into account, recording of reasons,
passing of orders in writing, limitation of time for various actions of the tax
authority, etc. Further, the right of appeal has been protected by providing
for appeals to the Income-tax Appellate Tribunal, and to the jurisdictional
High Court and the Supreme Court on substantial questions of law.
Balances upto
Rs. 5 lakhs Exempt from Fine and Penalty
To protect persons holding
foreign accounts with minor balances which may not have been reported out of
oversight or ignorance, it has been provided that failure to report bank accounts
with a maximum balance of upto Rs.5 lakh at any time
during the year will not entail penalty or prosecution.
Other safeguards and internal
control mechanisms will be prescribed in the Rules.
Amnesty Pay 30% Tax and 30%
Penalty to Avoid Prosecution
One time compliance
opportunity The Bill also provides a one time
compliance opportunity for a limited period to persons who have any undisclosed
foreign assets which have hitherto not been disclosed for the purposes of
Income-tax. Such persons may file a declaration before the specified tax
authority within a specified period, followed by payment of tax at the rate of
30 percent and an equal amount by way of penalty.
Such persons will not be prosecuted under the stringent provisions of the new
Act. It is to be noted that this is not an amnesty scheme as no immunity from
penalty is being offered. It is merely an opportunity for persons to come clean
and become compliant before the stringent provisions of the new Act come into
force.
Amendment of PMLA The Bill
also proposes to amend Prevention of Money Laundering Act (PMLA), 2002 to
include offence of tax evasion under the proposed legislation as a scheduled
offence under PMLA.
Thus, in keeping with the
commitment of the government for focussed action on black money front, an
unprecedented and multi-pronged attack has been launched to root out the menace
of black money. The Government is confident that this new law will act as a
strong deterrent and curb the menace of black money stashed abroad by Indians.