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Black Money (Undisclosed Foreign Income and Assets ) and Imposition of Tax Act 2015

CA Sripriya K 
on 04 September 2015

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1. What is this new Act all about?

Flight of money representing undisclosed incomes and asset creation abroad has been a perennial source of concern. As a one time measure to combat, control and bring to tax such black moneys, the Indian government has enacted the Black Money ( Undisclosed Foreign Income and Assets ) and Imposition of Tax Act 2015

2. When does this Act Come into effect?

The Act shall come into force on 01.07.2015* and is hence relevant for AY 2016-17 and previous year 2015-16.

3. What are the categories of tax payers this Act applies to?

All persons being resident other than not ordinarily resident in India (as per the Income Tax Act 1961) are covered by this law.

Provisions of this Act also apply to beneficial owners & other ultimate beneficiaries

4. What is the scope and coverage of this Act?

Provisions of the Act are applicable to undisclosed foreign income source & assets located outside India

5. What is the tax rate applied for such undisclosed black moneys

Tax Rate - Undisclosed foreign income and asset shall be taxed at a flat rate of 30%

Interest - As provided under 234A, B & C of Income Tax Act, 1961

Penalty –

•  in relation to Undisclosed Foreign income and Asset shall be three times of tax amount (90%)

• Penalty for default in payment of tax arrear and in case of continuing default, shall be an amount equal to the amount of tax arrear

6. What are the key aspects in determining the tax payable on such undisclosed moneys

• ​Taxable Value: The Taxable Value referred is the fair market value (including the financial interest in any entity)as on the first day of the financial year in which it comes to the notice of the Assessing Officer

• Deductions: While computation NO DEDUCTION in respect of any expenditure or allowance or set off of any loss shall be allowed to the assesse. However, Income which was offered to tax earlier (if proved) is deductible*

• Penalty: Failure to report/ furnishing inaccurate particulars in return forms attracts penalty

• Penalty Exemption: Penalty shall not apply in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to INR 0.5 million at any time during the previous year

7. Is there a One Time Scheme

Yes, there is a One Time Compliance scheme. This would be done by a Declaration filed by the assesse. However there is no amnesty but a lower slab of penalties. There is no guarantee of anonymity for those disclosing under the OTC

The slabs are as follows:


Status

Applicable Rates

During the window period

30% tax + 30% Penalty= 60% Charge

After the window period

30% tax + 90% penalty= 120% Charge


8. What is the period of the One Time Compliance Scheme?


Status

Applicable Rates

30 Sep 2015

Date on or before which a taxpayer is to make a declaration in respect of an Undisclosed Asset located outside India to the tax authority

31 Dec 2015

Date by which taxpayer must pay the 60% charge as above in respect of the Undisclosed Foreign Asset so declared


9. Is the OTC available to every body

One Time Compliance facility will not be available in the following cases

• I-T Department has initiated proceedings before June 30, 2015 or has carried out searches

• I-T Department has received information from foreign nations on or before June 30, 2015

• Proceedings of prosecution is pending under Chapter IX (offences relating to public servants) or Chapter XVII (Offences against property) of the Indian penal code or under the Unlawful activities (Prevention) Act or the Prevention of Corruption Act.

10. What is the impact of the declaration

On filing a Voluntary declaration (Form 6) & payment of tax due (Penalty equal to tax amount), the following consequence shall follow:

• Declaration of undisclosed foreign asset will not affect the finality of completed assessments

• No prosecution shall be initiated under the black money law and the declaration so filed will not be used as evidence under other law such as the wealth tax Act, the FEMA, the Companies Act etc. Exemption from wealth tax is also available

• 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

11. What are the precautions to be exercised in filing the declaration

Declaration shall be void and shall be deemed never to have been made:-

• If the declarant fails to pay the entire amount of tax and penalty within the specified date, i.e., 31.12.2015 or

• Where the declaration has been made by misrepresentation or suppression of facts or information.


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CA Sripriya K 

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