In a bid to encourage tax evaders to avail of the compliance window provided for declaring undisclosed foreign assets under the new black money Act, the government on Monday clarified that it won’t take action against individuals whose declaration is found ineligible due to it having prior information under tax treaty.
In another concession, along with I-T Act, Customs Act, FEMA, Wealth Tax Act and Companies Act, declarations made under the new Act will also not attract penalties under the Prevention of Money Laundering Act (PMLA), the tax department clarified.
According to the clarification issued in the form of frequently asked questions (FAQs) by the I-T department, “In respect of such assets which have been duly declared in good faith under the tax compliance but not found eligible … no action lies in respect of such assets under the Act. However, such information may be used for the purpose of the income-tax Act.”
The Centre has already notified rules for calculating overseas income and assets under the Black Money (Undisclosed Foreign Income And Assets) and Imposition of Tax Act, 2015, 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 etc.
A small window till December 31 has been offered for people to declare undisclosed income and pay tax and penalty of a total 60 per cent. But those who have already been issued notices or cases in which information has been received from a foreign country up to June 30, 2015, will not be able to avail of the opportunity. Tax evaders who want to utilise the opportunity will have to declare their undisclosed foreign assets by September 30.
While the FAQs make it clear that those who have acquired undisclosed foreign assets through corruption money will not be eligible for availing of the compliance window, tax evaders will be able to claim capital gains on sale of such assets in future, which they have declared and paid for tax and penalty.
“The declarant will be liable for capital gains under the I-T act on sale of such asset in future… Since the asset will be taxed at its fair market value the cost of acquisition for the purpose of capital gains shall be the said fair market value and the period of holding shall start from the date of declaration of such asset,” the department said. Tax and penalty in case of undisclosed bank account will be on sum of all deposits and not on balance on a particular date, the department added.
Procedures and forms have been issued to declare the undisclosed assets in foreign countries. 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 would be effective July 1.
A person who has inherited any property acquired from unexplained sources of investment will have to declare the same on the fair market value of the property, which will be higher of its cost of acquisition and the sale price.