A detailed Guidance on disclosing income under Pradhan Mantri Garib Kalyan Yojna (more popularly known as Income Disclosure Scheme - II):
As per the Notification No. 116/2016, the Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016, is a declaration u/s 199C of the Finance Act, 2016, in respect of the Taxation and Investment Regime for PMGKY. The “PMGKY” (Pradhan Mantri Garib Kalyan Yojna) is a scheme very similar to or we can say an extension of Income Disclosure Scheme which ended recently. This Scheme can be used by a person holding Unaccounted Money (Hard Cash or in Undisclosed Bank Account) intending to pay taxes and make them Accounted money in a legitimate way. The tax component in “PMGKY” is significantly higher which totals upto effective 58% (50 % tax and 7% Notional interest income foregone on 25% interest free Deposit for 4 years) as compared to just 45% in erstwhile Income Disclosure Scheme. This Scheme has come on the backdrop of Demonetization which has forced people to either to forget their Unaccounted money (which is most Unlikely) or use dubious methods to convert their Black Money through some medium (where also it is most likely to invite litigations and even Imprisonment and after that also your Black Money remains Still Black Money only and is illegitimate). In such a scenario this scheme provides opportunity to come with your unaccounted wealth, pay required tax and avoid all litigations and Prosecutions and go with Accounted money and Clean Hands.
This article sets out steps to be followed to Disclose your Unaccounted Money in “PMGKY”:
Firstly let us assume Assessee wants to disclose Rs.100 under the PMGKY i.e. he has undisclosed wealth worth Rs. 100, (call it as A) that he is willing to disclose under the aforesaid Scheme.
Explanation of above Diagram:
1st Step is to pay Tax as required
• The above table explains how much amount is to be paid as tax, how much deposit is to be placed with Government. Firstly, Up-front tax payable is 50% of Disclosed Sum i.e. Rs.50 (Including Surcharge and Penalty) in our case. This Tax is to be paid as normally you pay. Tax is to be paid before any kind of Declaration under this scheme is made. Please keep a copy of proof of Tax Payment.
2nd Step is to Invest in Deposit (Bond Ledger) as required:
• Invest a minimum of amount equivalent to 25% of your Disclosure i.e. Rs. 25 in our case, in such Deposits which can be opened at your bank along with an application Form II (Draft has been attached) giving various details of the Depositor. This Deposit shall be redeemed (returned to depositor) on Completion of Four Years from date of Deposit and will not earn any interest in these 4 years. Please keep the proof of Deposit made by you in this scheme.
• As an Acknowledgement of receipt of such amount you will receive a Certificate from the Bank in Form I (Draft Attached).
• There are other Forms for Nomination and cancellation of Nomination, etc (Form III and Form IV respectively).
• After above 2 Steps now it is time to furnish Declaration of your Undisclosed Income u/s 199C (1) which is to be made by filing a form with Income Tax Department. This is to be filed in Form 1 (Draft Attached).
• Such Declaration shall be furnished to Principal Commissioner/ Commissioner as the case may be and can be submitted online (by EVC or DSC) or in Print Mode and if any Omission or Wrong Statement is found, then it may be revised.
• The Principal Commissioner will issue a Certificate (Acknowledgement) in Form 2 (Draft Attached) to the Declarant within 30 days from end of the month in which a valid declaration u/s 199C is furnished.
Procedure for Filing of Declaration in Form 1 on IT Portal:
• For Filing Form 1 you must have registered yourself on ITD Portal.
• Please keep scanned copy proof of payment of tax and scanned Copy proof of Deposit made under the scheme ready.
• Log in into the ITD Portal, then there is a separate Menu named as “PMGKY”, and in that select “Prepare and Submit Online Form 1”. Then select appropriate option. If you want to submit the form using “EVC”, then you must select “submit To: Jurisdictional PCIT/CIT.”
• If you want to submit using A Digital Signature, then you can select any of the options.(Jurisdictional PCIT/CIT or CPC Bengaluru).
• Go ahead by Clicking “Continue” and then fill in all the details such as name, Address, etc.
• Then enter the details of Undisclosed Income (i.e. Rs. 100 in our case) which may be shown as Held in Cash or Deposited in Bank Account. On the basis of amount entered here, Tax, Surcharge, Penalty fields will be Calculated automatically.
• Then enter details of tax payment as asked for.
• In next step user is required to enter the amount of Deposit (Bond) made with the bank (it should be >= 25% of Undisclosed Income), in our Case it is Rs. 25 and then enter other details as asked for.
• Click on Submit button and then select “ Verification” and fill in the details.
• Then go to Attachments tab where you are required to attach scanned copy of proof of payment of Tax and proof of Deposit made with the bank as given in Step 1 & 2.
• Then go ahead and “Submit” the Form and select a method of verifying the form and verify it.
PMGKY User manual, Recent Notifications of Government and The Taxation Laws (Second Amendment) Act, 2016.
Form I (Acknowledgement of receipt of Amount of Deposit as required).
Form II (Application form for opening a “Deposit” of amount >= 25% of Disclosure).
Form 1 (Form to be filed for Disclosure of Sum under the Scheme).
Form 2 (Acknowledgement received on filing Form 1)
Form1 and 2 are available on the link below:
This document is for general guidance and informational purposes only, and does not constitute professional advice. You should not act upon the information contained in this communication without obtaining specific professional advice from your Advisor. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this communication, and, to the extent permitted by law, author accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it. The above is based on data and information as on 2th December 2016 and present laws and regulations prevailing in India.
The Author is a CA Final student (CA Final exam result due in Jan 2017) and CS Professional Student and CS Executive rank-holder. The writer has a practical exposure of 4 years in the field of Finance, taxation, Management Consultancy, ROC Compliance and Investment related subjects can be contacted at:
Linked In Profile : Yash Hariyani.
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