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Background
The Black Money (Undisclosed Foreign Income and Assets) And Imposition Of Tax Act, 2015 provides for separate taxation of any undisclosed income in relation to foreign income and assets
Such income will not be taxed under the Income-tax Act but under the stringent provisions of The Black Money (Undisclosed Foreign Income and Assets) And Imposition Of Tax Act, 2015
Applicability of the Act
The Act is applicable to all persons resident in India. “Resident” means a person who is resident in India within the meaning of section 6 of the Income-tax Act. The provisions of the Act is applicable to both undisclosed foreign income and assets including financial interest in any entity for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act.
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
In addition to tax payable at 30%, the penalty for non-disclosure of income or an asset located outside India is 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.
Failure to furnish return or information
Failure to furnish return in respect of foreign income or assets or where 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 shall attract a penalty of Rs.10 lakh. and is punishable with rigorous imprisonment for a term of six months to seven years. This provision is also applicable to beneficial owners or beneficiaries of such illegal foreign assets.
Penalty for willful attempt to evade tax
- The punishment for willful attempt to evade tax in relation to a foreign income or an asset located outside India is rigorous imprisonment from three years to ten years. In addition, it will also entail a fine.
- If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine.
Penalty for default in payment of tax arrears
Every assessee who has not paid tax demanded on such undisclosed income within the time limit issued in the notice of demand shall be deemed to be assessee in default and he shall be liable to a penalty of an amount, equal to the amount of tax arrear.
Penalty for other defaults
A person fails to
(a) answer any question put to him by a tax authority in the exercise of its powers undethis Act;
(b) sign any statement made by him in the course of any proceedings under this Act which a tax authority may legally require him to sign; (c) attend or produce books of account or documents at the place or time, if he is required to attend or to give evidence or produce books of account or other documents, at certain place and time in response to summons issued under section 8
He shall be liable to pay a penalty which shall not be less than Rs. 50000 which may be extended to Rs. 200000
Abetment or inducement to make false account or statement
Abetment or inducement of another person to make a false return or a false account or statement or declaration under the Act is punishable with rigorous imprisonment from six months to seven years. This provision is also applicable to banks and financial institutions aiding in concealment of foreign income or assets of resident Indians or falsification of documents.
Exception
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
One time compliance opportunity
The Act provides a one time compliance opportunity for a limited period to persons who have any undisclosed foreign assets which have 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 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.
Check list to avoid the prosecution under Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015
For Bank Account
- The name of the assessee
- Whether the assessee has foreign bank account? Yes / No
- If answer to above is Yes,
- Whether the assessee is sole holder / joint holder / beneficial holder of the said bank account
- Name of the Bank, Address of the Branch
- Bank Account Number
- Balance as on the end of the financial year relevant to the Assessment Year in the said bank account in foreign currency and Indian currency
For Foreign Assets
- Whether the assessee has foreign assets? Yes / No
- If answer to above is Yes,
- Whether the assessee is sole holder / joint holder / beneficial holder of the said Foreign Assets
- Type, Nature, Address of foreign country where the Foreign Assets held
- Value of each Foreign Assets as on the end of the financial year relevant to the Assessment Year in the said bank account in foreign currency and Indian currency
Illustration amount chargeable to Tax
A house property located outside India was acquired by an assessee in the previous year 2009-10 for Rs. 50 lakhs. Out of the investment of Rs. 50 lakh, Rs. 20 lakhs was assessed to tax in the total income of the previous year 2009-10 and earlier years.
Such undisclosed asset comes to the notice of the Assessing Officer in the year 2017-18. If the value of the asset in the year 2017-18 is Rs. 1 Crore,
The amount chargeable to tax shall be A-B=C
where, A=Rs.1 crore,
B=Rs. 1 Crore x Rs. 20 lakh/50 lakh= Rs.40 lakh,
C=Rs. 100 lakh (–) Rs. 40 lakh = Rs.60 lakh
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