Brief Features of Black Money Bill

the Undis­closed For­eign Income and Assets (Impo­si­tion of Tax) Bill, 2015 has been 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.

Penal­ties – Vio­la­tion of the pro­vi­sions of the pro­posed new leg­is­la­tion will entail strin­gent penal­ties.

The penal­ty for nondis­clo­sure 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 – The Bill pro­pos­es enhanced pun­ish­ment for var­i­ous types of vio­la­tions. 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. 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.

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.

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.

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.

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