Foreign black money law in, domestic one coming

The Bill provides for stringent measures against violators including attachment and confiscation of benami properties.

By: Press Trust of India Written by Shruti Srivastava | New Delhi | Updated: May 14, 2015 5:03 am
Black money, india black money, black money bill, benami bill, benami transactions bill, Arun jaitley, black money news, india news, news, cabinet bills, pending bills Finance Minister Arun Jaitley said that the world is no longer ‘willing to tolerate tax havens which thrive in secrecy’.

A tough new Bill to deal with black money kept abroad was passed by Parliament Wednesday with Finance Minister Arun Jaitley warning those having such assets to utilise the “compliance window” because, he said, the world is no longer “willing to tolerate tax havens which thrive in secrecy”.

Speaking in the Rajya Sabha where the Bill was cleared Wednesday, Jaitley made it clear that the new law will not cover those having amounts equivalent to Rs 5 lakh in bank accounts abroad which may belong to students or those working there.

Some of the Bill’s provisions have rattled a section of India Inc, especially the ones that include imprisonment up to seven years for failure to disclose foreign assets; a penalty on the fair market value of the asset instead of the acquired value; and punishment for every person responsible to the company for any offence under the law.

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Powers given to the tax recovery officer under the legislation have also been cited as having potential for misuse.

Alongside the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, the government also introduced the Benami Transaction (Prohibition) Bill on Wednesday in the Lok Sabha that specifically targets domestic black money, wherein rigorous imprisonment of seven years for people found in violation of the legislation has been proposed along with a penalty of up to 25 per cent of the fair market value of the property.

The two are part of the government’s initiative to crack down on illegal money, an issue that was a hot button issue during the election campaign last year.

But some sounded a note of caution. “It (the new law) is certainly a tool which can be used for harassment,” Sunil Kant Munjal, joint managing director of Hero MotoCorp Ltd and Chairman of Hero Corporate Service Ltd, told The Indian Express .

Last week, industry body Assocham raised several concerns regarding the Bill, drawing the Finance Minister’s attention to the provisions that could create problems in the long run. For instance, the lobby group said, the tax is proposed to be recovered on the “fair market value” of the asset and not the acquired value. The industry body said that this provision could “create hardship” in cases where the asset has been acquired few years back and the value of such asset has substantially gone up. “If the value of the asset has appreciated over the years, the person making the declaration would become liable to pay tax on such unrealized appreciated value which would be substantially higher than the amount which the declarant would have invested.”

Further, the Bill says that the tax recovery officer “can draw under his signature a statement of tax arrears of an assessee and it shall not be open to the assessee to dispute the correctness of any certificate drawn up by the officer on any ground whatsoever”. Amit Maheshwari, managing partner, Ashok Maheshwari and Associates, said that earlier, “if assessees skipped certain information they could, during assessment, clarify and rectify it. Now there is the provision of up to seven years of imprisonment”.

The Bill also makes the manager of a company, defined as per the Companies Act, 2013, liable for tax recovery, which is not allowed currently. For any offence under this Act, every person responsible to the company is to be liable for punishment and she will have to prove that the offence was committed without her knowledge to be absolved of the charges.

Apart from manager, defined as someone who “subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, whether under a contract of service or not”, managing directors are also covered by the bill for tax recovery.

Earlier, only directors of the company were liable for tax recovery.

As such, the bill says that those declaring unaccounted income or assets will have to pay a flat 30 per cent tax and a similar penalty while wilful tax evaders would be liable for 10 years rigorous punishment.

On the Benami Transaction (Prohibition) Bill, Revenue Secretary Shaktikant Das told The Indian Express, “This is in continuation of the initiatives of the government in its resolve to fight the menace of black money. The Bill declares all benami transactions as illegal and only such property that is bought from the known source of income for spouse or children will be exempt from the ambit of the legislation”.

He added that benami property would include both movable and immovable property.

The Bill provides for stringent measures against violators including attachment and confiscation of benami properties, prosecution and aims to act as a major avenue for blocking generation and holding of black money in the form of benami property, especially in real estate.

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