A group of income-tax officials has submitted a detailed report to the Central Board of Direct Taxes (CBDT), recommending significant changes to enhance the enforcement of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The suggestions focus on rationalising penalties for non-disclosure of foreign assets, prioritising large evasions, and streamlining procedures to prevent repetitive penalisation.
Key Recommendations of the Report
Rationalisation of Penalties
- The report highlights the need for clarity on penalties imposed for non-disclosure of the same foreign asset in successive years.
- Under the current system, each year’s failure to disclose is treated as a fresh default, leading to penalties for every year of non-compliance, even for unintentional omissions.
- The report proposes a more balanced approach, especially in cases where the omission is not deliberate.
Improved Clarity for Taxpayers
- Instances where taxpayers disclose foreign income or assets in their returns but fail to include them in the "schedule of foreign assets" attract penalties.
- The report suggests enhanced communication to help taxpayers avoid such oversights.
Focus on Large Evasions
- The report recommends targeting cases involving significant tax evasion or high-value foreign assets.
- A more refined filtering process for undisclosed asset information could help focus resources on high-risk cases while avoiding overburdening officials with smaller cases.
Avoiding Repetitive Penalisation
- The report calls for procedures to prevent "repetitive penalisation" for the same omission across multiple years, except where intentional concealment is evident.
Current Framework and Challenges
Under the Black Money Act, each year's income-tax return is treated as a separate obligation. This often results in penalties being levied for multiple years for the same undisclosed asset unless deliberate concealment is proven. Such practices have led to disproportionate punishment in some cases, prompting the need for procedural reforms.
Additionally, the report addresses concerns about the rising compliance burden. Earlier this year, the threshold for disclosing foreign assets was raised from ₹5 lakh to ₹20 lakh to ease smaller taxpayers' obligations.
Way Forward
The proposed changes aim to strike a balance between strict enforcement of the law and fair treatment of taxpayers. By prioritising larger cases and providing clearer guidelines, the CBDT can ensure better compliance and efficient resource utilisation.
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