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Black money law: Centre notifies rules on overseas income, assets

Compliance window not applicable on notices sent before June 30.

By: ENS Economic Bureau | Published: July 4, 2015 2:12 am
 Black money, overseas income, black money law, tax evaders,  overseas assets, undisclosed income, black money tax evaders, business news, economy news Under the new Act, tax will also be chargeable for assessment year 2016-17 for which the relevant previous year is 2015-16.

The Centre has notified rules for calculating overseas income and assets under the new black money law, wherein tax evaders will have to shell out duty and penalty on the fair market value of undisclosed overseas assets such as immovable property, jewellery, bullion, shares, archaeological collections and art work.

While a small window till December 31 has been offered for people to declare undisclosed income and pay tax and penalty, those excluded from the list include people who have already been issued notices or cases in which information has been received from a foreign country up to June 30, 2015, according to the rules issued for the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Laying down the procedures for the declaration of undisclosed assets in foreign countries, the department has also issued various forms to declare and acknowledge such declarations along with a statement of assets located abroad.

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Under the new Act, tax will also be chargeable for assessment year 2016-17 for which the relevant previous year is 2015-16. Accordingly, the Act and the compliance provisions for the same would be effective July 1. However, the compliance window may not be as attractive for tax evaders because it does not offer any confidentiality clause, Amit Maheshwari, managing partner, Ashok Maheshwary and Associates, said. He added that the high compliance cost will deter big tax evaders to come forward and declare the undisclosed assets.

However, tax experts agree that the rules are simple and provide a detailed process for making the declaration.

“True to its commitment, the government has kept the process simple. For the purpose of one-time declaration, the guidelines also prescribe valuation norms for various category of assets, generally being the valuation as on July 1, 2015, or cost of acquisition, whichever is higher,” said Divya Baweja, partner, Deloitte Haskins and Sells.

The Act was passed by Parliament in May when finance minister Arun Jaitley warned those having such assets to utilise the compliance window because, “the world is no longer willing to tolerate tax havens which thrive in secrecy”.  The Act will not cover those having amounts equivalent to Rs 5 lakh in bank accounts abroad, which may belong to students or those working there.

Under the Act, defaulters will have to pay 30 per cent tax and 30 per cent penalty under the compliance window. However, those who do not declare their wealth in the window period will be liable to pay 30 per cent tax and 90 per cent penalty and could also face imprisonment for a minimum of three years which could go up to 10 years.

“Where a valid declaration as detailed above has been made, the amount of undisclosed investment in the asset declared shall not be included in the total income of the declarant under the Income Tax Act for any assessment year; the contents of the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the I-T Act, Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act or the Customs Act,” the rules state. However, this is not to say that tax evaders will not be prosecuted under other Acts, such as PMLA, if found guilty. The fair market value of an immovable property will be higher from the acquisition cost or the price that the property shall fetch in open market on the date of valuation. Bullion, jewellery, precious stone, drawings, paintings, archaeological collections, and sculptures or work of art will also be similarly valued.

Amarpal Chadha, tax partner, EY India, said that with the law enforced now, it is important to collate information “already disclosed under the normal I-T returns and reconcile the same with the disclosures being made now under the Black Money Act.”

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  1. S
    Satendra kumar
    Jul 4, 2015 at 6:09 am
    The black money law for all nationals in India should be more tough and hard that will make harder to hide any money anywhere in the world.
    1. M
      Md abzal
      Jul 4, 2015 at 3:57 pm
      Cashless transaction is one of the best strategy to curb black money generation. it is better to develop some provision or laws for under value and overvalue of invoice, make uniformity in price of minerals and other goods....
      1. K
        Jul 4, 2015 at 7:27 am
        Free remittance of around 200000 dollars an year is permitted by legal means. These when kept in a bank account abroad by green card holders, who may be tax residents in both countries by definition of respective tax jurisdictions, may exceed the 5 lakh rupee window. When such accounts are funded from Indian legal sources and declared in ITR 2 will they also attract tax in India. It should not for the balance but on interest ,if any, only should be taxed. Also govt. in ITR should give a conversion rate since detale are sought in Indian rupees.
        1. B
          Jul 4, 2015 at 1:00 pm
          in india when a house is sold there is 60 to 70 percent black Money involved,where that Money comes from.
          1. S
            Jul 4, 2015 at 5:01 am
            How about black money that is in the country? There is no mention of that! Of course, we all know why!
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