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New Income Declaration Scheme - Decoded

Prabhakar K S 
on 30 November 2016

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The Lok Sabha today  passed The Taxations Laws (Second Amendment) Bill, 2016 to penalize deposits made after November 8, 2016.

According to the said Bill, the declarant under ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (in brief ‘PMGKY’) shall be required to pay 30% tax of the undisclosed income, and penalty at 10% of the undisclosed Income. Further, a surcharge called “Pradhan Mantri Garib Kalyan Cess “@33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totalling to approx. 50), the declarant shall have to deposit 25% of the undisclosed income in a Deposit Scheme to be notified by the RBI under the “Pradhan Mantri Garib Kalyan Deposit Scheme, 2016”. 

For those who continue to hold onto undisclosed cash and caught, existing provision of the Income Tax law will be amended to provide for a flat 60% tax plus surcharge of 25% of Tax (15%), which will amount levy of 75% tax. Besides, the Assessing Officer has an exclusive power to charge a 10% penalty in addition to the 75% tax (totalling to approx. 85%).

An overview of the proposed amendments is given below:

Sl. No

Particulars

Existing Provisions

Proposed Provisions

1.

Penalty in General

Under Section 270A

For under reporting @50% & for misreporting @200% of tax (i.e. difference between returned income and assessed income).

No changes proposed

2.

Tax & Penalty for unexplained credit, investment, cash and other assets

Tax - Under Section 115BBE

Flat rate of tax @30% + surcharge + cess

Disallowance of expenses, deductions, set off etc.

Tax - Under Section 115BBE

Flat rate of tax @ 60% + surcharge @ 25% of tax (approx. tax 75%) 

Disallowance of expenses, deductions, set off etc.

Penalty - Under Section 271 AAC

@ 10% of tax payable in addition to tax (including surcharge) of 75%

3.

Penalty for search seizure cases

Penalty under Section 271AAB

  • 10% of income, if admitted, returned and taxes are paid
  • 20% of income, if not admitted but returned and taxes are paid
  • 60% of income in any other case

Penalty under Section 271AAB

  • 30% of income, if admitted, returned and taxes are paid
  • 60% of income in any other case

4.

Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016(PMGKY

No such provision and just proposed new Taxation and

Investment Regime

Undisclosed Income in the form of cash and bank deposit can be declared :

Tax @30% of income declared,

Surcharge @33% of tax   Total @ 50%

Penalty @10% of income declared  

Deposit: 25%of declared income to be deposited in inters free Deposit Scheme for four years

According to Statement of Objects and Reasons of the Bill, money from the said scheme is proposed to utilize for irrigation projects, housing, toilets, infrastructure, primary education, primary health, livelihood, etc. so that there is justice and equity. 

Latest clarifications:

The disclosures made in the ‘PMGKY’, that attracts 50% tax, will ensure that no questions will be asked about the source of fund. And same will ensure immunity from Wealth Tax, Civil Laws and other taxation laws.

However, there is no immunity from Foreign Exchange Management Act, Prevention of Money Laundering Act, Narcotics and Black Money Disclosure Act, etc.

Source: The Taxations Laws (Second Amendment) Bill, 2016 - Bill No 299 of 2016

The author can also be reached at sritaxandcorporate@gmail.com


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