In India, Black money refers to funds earned on the black market, on which income and other taxes have not been paid. But Indian Govt. took a very great step against the black money and a step to assess this income whether the income is located in India or abroad and now let me come to the main point of discussion that is:
THE ACT
An Act to make provisions to deal with the problem of the Black money that is undisclosed foreign income and assets, the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto.
WHAT WAS NEED TO INTRODUCE A SPCIFIC ACT ON BLACK MONEY?
Due to increase in cases of non disclosure of Income by people specifically the big business tycoons who use to rotate their black money among their relatives and friends so as to convert it into white money and also transfer their money in Foreign Bank Accounts with an intention to evade their income. So, a harsh step need to be taken so as to assess the black income.
Though the Income Tax Department is working very hard so as to find the culprits and assess their income but still there was need to subordinate an authority which will specifically look up into the matters of Black money & undisclosed assets and that authority will work under the above mentioned act.
This act will be come into force on 1st JULY, 2016.
BASIS OF CHARGE:
There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of 30 per cent of such undisclosed income and asset:
Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer.
Now, WHAT WILL BE THE VALUE OF THE UN-DISCLOSED ASSET:
The value shall be the fair market value of an asset (including financial interest in any entity) determined in such manner as may be prescribed.
COMPUTATION OF TOTAL UNDISCLOSED FOREIGN INCOME AND ASSET.
In computing the total undisclosed foreign income and asset of any previous year of an assessee:
a. No Deduction shall be allowed in respect of any expenditure incurred whether that deduction is allowed in Income Tax Act or not.
b. any income,—
c. which has been assessed to tax for any assessment year under the Income-tax Act prior to the assessment year to which this Act applies; or
d. Which is assessable or has been assessed to tax for any assessment year under this Act,
shall be reduced from the value of the undisclosed asset located outside India, if, the assessee furnishes evidence to the satisfaction of the Assessing Officer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax.
The amount of deduction in case of an immovable property shall be the amount which bears to the value of the asset as on the first day of the financial year in which it comes to the notice of the Assessing Officer, the same proportion as the assessable or assessed foreign income bears to the total cost of the asset.
ILLUSTRATION:
A house property located outside India was acquired by an assessee in the previous year 2009-10 for fifty lakh rupees. Out of the investment of fifty lakh rupees, twenty lakh rupees was assessed to tax in the total income of the previous year 2009-10 and earlier years.
Such undisclosed asset comes to the notice of the Assessing Officer in the year 2017-18.
If the value of the asset in the year 2017-18 is one crore rupees, the amount chargeable to tax shall be:
A-B=C where,
A=Rs.1 crore, B=Rs. (100 x 20/50) lakh= Rs.40 lakh,
C=Rs. (100-40) lakh=Rs.60 lakh
PROVISIONS GOVERNING THIS ACT:
The Act contains provisions to deal with the menace of black money stashed away abroad. It, inter alia, levies tax on undisclosed assets held abroad by a person who is a resident in India at the Rate of 30 percent of the value of such assets, provides for a penalty equal to 90 percent of the value of such asset,
a. And also provides for Rigorous Imprisonment of three to ten years for wilful attempt to evade tax in relation to a undisclosed foreign income or asset.
b. This act also introduced an One Time Compliance window for the Tax Payers
WHAT IS THIS COMPLIANCE WINDOW?
Considering the stringent nature of the provisions of the new law, Chapter VI of the Act, comprising sections 59 to 72, provides for a one-time compliance window to the people.
Basically, the concept of this compliance window is to provide an one time opportunity to the persons who are having undisclosed assets in foreign countries who have to disclose it in front of the department. This opportunity will be given for a limited period of time only.
SCOPE OF COMPLIANCE WINDOW:
A declaration under the aforesaid Chapter VI of the Act can be made in respect of undisclosed foreign assets of a person who is a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act.
A declaration can be made in respect of any undisclosed asset located outside India and acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year 2016-17 for which he had, either failed to furnish a return under section 139 of the Income-tax Act, or failed to disclose such income in a return furnished before the date of commencement of the Act, or such income had escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.
A declaration has to be filed under Form 6 which has been duly notified by the central government and also the procedure has been notified according to which the compliance is to be filed. The last for filing this declaration is 30th September, 2015.
But,
This declaration will not be eligible in the following cases:
Section 71 deals will the cases which are not eligible for the declaration:
a. Where a notice under section 142 or section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act has been issued in respect of such assessment year and the proceeding is pending before the Assessing Officer.
b. where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and the time for issuance of a notice under section 143 (2) or section 153A or section 153C for the relevant assessment year has not expired.
c. Where any information has been received by the competent authority on or before 30th June 2015 under an agreement entered into by the Central Government under section 90 or section 90A of the Income-tax Act in respect of such undisclosed asset.
In simple words, if any assessment proceedings under the above mentioned sections of the Income Tax Act is pending or proposed to be started in the case survey has been conducted and the time limit for the issuance of notice under the above mentioned sections has not been elapsed, then the declaration will not be eligible.
CIRCUMSTANCES WHERE DECLARATION SHALL BE INVALID:
In the following circumstances the declaration filed by the assessee will be invalid:
a. If the declarant fails to pay the entire amount of tax within the stipulated time or,
b. If the declarant intends to misrepresents the facts or information in the declaration.
In any of the above cases it shall be deemed as never the declaration has been filed by the assessee and all the provisions of this act including the penalties will apply accordingly.
PENALTIES & PROSECUTIONS:
1. PENALTIES:
Penalty for failure to furnish in return of income, an information or furnish inaccurate particulars about an asset (including financial interest in any entity) located outside India:
If any person by any means furnishes inaccurate details about an asset in the return of income under section 139 of this act, the assessing officer can direct him to pay penalty up to Rs. 10 lacs.
Provided that this section 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 five hundred thousand rupees at any time during the previous year.
PENALTY FOR DEFAULT IN PAYMENT OF TAX ARREAR:
Every person who is an assessee in default, or an assessee deemed to be in default, as the case may be, in making payment of tax, and in case of continuing default by such assessee, he shall be liable to a penalty of an amount, equal to the amount of tax arrear.
An assessee shall not cease to be liable to any penalty under sub-section (1) merely by reason of the fact that before the levy of such penalty he has paid the tax.
PENALTY FOR OTHER DEFAULTS:
A person shall be liable to a penalty if he has, without reasonable cause, failed to-
1. Answer any question put to him by a tax authority in the exercise of its powers under this Act;
2. Sign any statement made by him in the course of any proceedings under this Act which a tax authority may legally require him to sign,
3. Attend or produce books of account or documents at the place or time, if he is required to attend or to give evidence or produce books of account or other documents, at certain place and time in response to summons issued under section 8.
The penalty for the above mentioned defaults shall be minimum Rs. 50,000 and maximum Rs. 2,00,000.
No order imposing a penalty under this Chapter shall be passed after the expiry of a period of one year from the end of the financial year in which the notice for imposition of penalty is issued under section 46.
2. PROSECUTIONS:
PUNISHMENT FOR FAILURE TO FURNISH RETURN IN RELATION TO FOREIGN INCOME AND ASSET:
If a person fails to furnish a return for the foreign undisclosed asset under section 139 of the act then he shall be liable for the rigorous imprisonment of for a term which shall not be less than six months but which may extend to seven years and with fine.
This same provision shall be apply in the case of failure to furnish in return of income, any information about an asset (including financial interest in any entity) located outside India and the same provision will also apply in the case of False statement given by assessee in case of verification .
PUNISHMENT FOR WILFUL ATTEMPT TO EVADE TAX:
In the above mentioned default, the assessee shall be liable for rigorous imprisonment of for a term which shall not be less than three years but which may extend to ten years and with fine.
AGREEMENT WITH FOREIGN COUNTRIES OR SPECIFIED TERRITORIES:
The Central Government may enter into an agreement with the Government of any other country—
(a) For exchange of information for the prevention of evasion or avoidance of tax on undisclosed foreign income chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion or avoidance;
(b) For recovery of tax under this Act and under the corresponding law in force in that country.
Any specified association in India may enter into an agreement with any specified association in the specified territory outside India for the purposes as mentioned in points (a) & (b) above and the Central Government may by notification make such provisions as may be necessary for adopting and implementing such agreement
There is a lot to discuss yet but the above article touches the broad aspects of this act so as to make an understanding of the act in simple manner.
CONCLUSION:
Enactment of this Act is a very major and great step taken by central government so as to assess the black money and Undisclosed assets of the Indian people held in foreign countries. It is not wrong to say that the implementation of this act will not be so easy as we are assuming but still this factor will also overcome by the time and This step will be proved as an effective step in the progress of our Nation.
-ATUL KHURANA
CA FINAL STUDENT
CAclubindia
