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The Narendra Modi government, on Wednesday, notified the compliance window under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The compliance window is in force till September 30, and will allow those with undisclosed income and assets abroad to declare these without facing prosecution.
"The Central government has notified the 30th day of September, 2015, as the date on or before which a person may make a declaration in respect of an undisclosed asset located outside India under the compliance provisions of the Black Money Act," said a finance ministry press release.
"The last date by which a person must pay the tax and penalty in respect of the undisclosed foreign assets so declared shall be the 31st day of December, 2015," the release stated. Hence, while people will have three months to declare their undeclared assets starting today (Wednesday), they will have another three months to pay the penalties and taxes on the said assets," it added.
The window will come ahead of the imposition of the stringent Act from assessment year 2016-17. As per the Act, those keen to avail the facility can declare their foreign assets and income and pay a tax and penalty, each at 30 per cent of the value of the undeclared assets.
Upon fulfilling the conditions of the compliance window, a person or entity "shall not be prosecuted under the Bill and the declaration made by him will not be used as evidence against him under the wealth tax Act, the Foreign Exchange Management Act (Fema), the Companies Act or the Customs Act. Wealth tax shall not be payable on any asset so disclosed," the Act states.
After the compliance window is over and the Act is enforced, those with undeclared assets and income abroad will have to pay tax of 30 per cent and a penalty of 90 per cent. They will also face prosecution. This means violators will not only lose their assets, they will also have to pay an amount more than the value of the asset.
Wilful attempts to evade tax in relation to foreign income will be punished with rigorous imprisonment of three-10 years. Failure to furnish return of income from foreign assets, as well as to disclose the assets, will be punishable with rigorous imprisonment of six months to seven years.
However, there are concerns that even a person paying taxes and penalties on previously undeclared assets could yet be prosecuted under the Prevention of Money Laundering Act (PMLA). This is because the black money Act does not say fresh declaration of undisclosed money or properties abroad will not be used as evidence for prosecution under PMLA. As stated above, it guarantees immunity only from four laws.
According to tax experts and analysts, unless the Central Board of Direct Taxes clarifies its stance on PMLA, people with unaccounted wealth and assets abroad might not declare their assets for fear of prosecution later.
Experts say the confusion is made worse with the Act proposing to amend PMLA to include tax evasion in relation to undisclosed foreign income and assets under the proposed legislation as a scheduled offence.
However, senior government officials have sought to dispel the concern, saying the four laws cited in the Act are enough to safeguard against any later prosecution under other laws. They say PMLA can only be invoked if there is a predicated offence committed with regard to the money.
The black money Bill was passed by Parliament in this Budget session. It received Presidential assent and became law on May 26, 2015.
