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THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 introduced by the Union Finance Minister, Sh. Arun Jaitley on Monday, 28th November, 2016 in Lok Sabha got passed on Tuesday, 29th November, 2016. Do you think  is it a part and parcel of the Income Disclosure Scheme of the government which ended on 30th September, 2016 or a new version of IDS? The Government has once again opened the windows for undisclosed income deposited in bank accounts after 8th November, 2016 in follow up of demonetisation decision.

Now it depends whether the declaration is made voluntary or it is caught up as undisclosed income by the Department. Let’s go through the salient features of the Scheme:

1. This Scheme may be called the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

2. The Income declared under this scheme will attract tax of 30% plus 33% surcharge on tax  (known as ‘Pradhan Mantri Garib Kalyan Cess’) plus penalty equal to 10% of undisclosed income which will be equal to 50% of undisclosed income. Basically, 50%  of income declared by the hoarders will become clean on giving this declaration.

Does it mean that on depositing 100%, they will be able to withdraw clean 50% of income? The answer is straight forward – NO. Even though 50% becomes clean income, but the withdrawal is restricted to 25% only. Now, what will happen to another 25% !!

3. The declarant will have to deposit 25% of the undisclosed income in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. No interest will be provided to the depositor in any case plus the money will be locked in for a period of four years from the date of deposit.

4. This amount is proposed to be utilised for the programmes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc.; so that there is full justice and equality for the common mass.

5. No deduction shall be allowed against the income declared in respect of any expenditure or allowance or set off of any loss. This means entire income declared will go to tax, cess and penalty at a flat rate of 50 %. It’s quite harsh for the black money hoarders.

6. The declarant shall deposit an amount which shall not be less than 25% of the undisclosed income under ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’.

It is to be noted that the above income declared shall not be included in computing the total income of the declarant for any assessment year under the Income Tax Act.

7. The Bill provides for more stringent provisions for those who have escaped this scheme also. The tax liability will go upto 60% of their income plus surcharge @25% on tax plus penalty equal to 10% of tax making it 81% of their unexplained cash credits for persons caught with unexplained income.

Penalties and tax rates are too high and stringent and the measures taken to curb are more severe. Let’s all pledge to fully cooperate with the Government in successful implementation of the Scheme so that Black Money is withdrawn from the system permanently.

Save the Nation. Curb Black Money.

The author can also be reached at

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Published by

CA Neha Gupta
(Managing Partner, LNG & Associates)
Category Income Tax   Report

2 Likes   9 Shares   2226 Views


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