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BW Businessworld

Black Money Bill: What It Means

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The Finance Minster on 20 March, 2015 introduced in the Parliament a comprehensive new law on Black Money slashed away abroad. The new Bill is known as “The Undisclosed Foreign Income & Assets (Imposition of Tax) Bill, 2015. In this article an attempt has been made to bring the salient features of this new Bill so that all those persons who are holding foreign income and assets can take advantage of the provisions contained in this Bill.

The provisions of the new Bill will be applicable to all persons resident in India and the provisions of the act will apply to both undisclosed foreign income as well as foreign assets. This would also include financial interest in any entity.

It is clearly provided in the Bill that the 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.

All these persons who do not disclose the income or asset located outside India will be slaped with a penalty which 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%.

It may be noted that most of the Income-tax Return forms now require that tax payer to mention details of Foreign Assets in the Schedule FA. This schedule requires the tax payer to fill up details of the following Foreign Assets:

a)     Details of Foreign Bank Account

b)   Details of Financial Interest in any account

c)    Details of Immovable Property

d)   Details of any other Asset in the nature of investment

e)    Details of the accounts in which the tax payer is having signing authority

f)     Details of trusts created under the laws of a country outside India in which the assessee is a trustee, beneficiary or settlor.

It is provided in this Bill that 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.

The new Bill provides for very strict norms for prosecutions for willful attempt to evade tax in relation to a foreign income or an asset located outside India which will be rigorous imprisonment from three years to ten years. In addition, it will also entail a fine.

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 provision contained in the new Bill further provide that 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.

To implement the principles of natural justice the provisions of appeal to Income-tax Appellate Tribunal, High Court and Supreme Court would be available to the tax payers. However, persons with minor balances upto Rs. 5 lakh at any time during the year will not entail penalty or prosecution.

The new law is going to be really very stringent for all those persons having undisclosed income and assets in a foreign country but the new Bill provides for 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.

It is also proposed to include offence of tax evasion as an offence under the Prevention of Money Laundering Act.

The above mentioned provisions in the new Bill on Undisclosed Foreign Income and Assets is necessary to help the country to retain the wealth of our country in our country only. Hence this new Bill will be very heavy in terms of tax evasion by Indian residents by making investments outside India through undisclosed sources. The one time opportunity granted by the Government should be taken advantage by all those persons who are in possession of undisclosed foreign income and assets.

The provisions will apply to all persons resident in India. Section 2(31) of Income-tax Act, 1961 states that person includes:

(i) an individual

(ii) a Hindu undivided family

(iii) a company

(iv) a firm

(v) an association of persons or a body of individuals, whether incorporated or not

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses

The author is tax & investment Consultant at New Delhi for the last 45 years.

Email: [email protected]