Stating that there are several loopholes in the proposed black money law, industry chamber Assocham has asked the government to provide for an "immunity" to those wanting to avail the one-time window of compliance.
In a letter to Finance Minister Arun Jaitley, Assocham has said that loopholes in the proposed legislation need to be plugged in order to avoid "harassment" to those availing the compliance window.
In a series of recommendations, Assocham said the Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015, does not provide for immunity from the declaration being admissible as evidence for the purpose of any proceedings relating to imposition of penalty or prosecution under the Prevention of Money Laundering Act 2002 (PMLA).
"In the absence of such immunity, it may be possible that information about the declaration is passed on to the authorities under the PMLA and it could be assumed that an offence of money laundering is committed under PMLA by the declarant," Assocham Secretary General DS Rawat said in the letter to Jaitley.
The letter said immunity should be granted from the declaration being admissible as evidence against the declarant in such cases.
Highlighting issues related to valuation of undiscolsed foreign assets, Assocham said the 30 per cent rate of tax proposed under Bill "could create hardship in cases where the asset has been acquired few years back and the value of such assets has substantially gone up".
"The person making the declaration would become liable to pay tax on such unrealised appreciated value which would be substantially higher than the amount which the declarant would have invested," the letter said.
Tax should be levied on the amount invested or the fair value of the undeclared foreign asset "in the year of acquisition of the asset", it recommended.
The industry chamber further said: "if the asset is acquired partly out of income not chargreable to tax in India, part declaration of such assets should be allowed".
Assocham also drew the Finance Minister's attention to the fact that in the proposed Bill "no time limit has been specified to issue a notice by assessing officer", which could lead to situations where notice is sent to an individual with a time lag leading to confusion over on the basis of which year the undisclosed foreign asset would get taxed.
"It is recommended that time limit for issue of notice by the assessing officer should be provided...As well as provision for recording the date which such information (about the undisclosed asset) is received," it added.
On the issue of punishment for willful attempt to evade tax, Assocham said the offence should be linked to Income Tax Act and not the new Act.
The Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015 contains stringent provisions to prosecute those stashing illicit wealth abroad, with rigorous imprisonment of up to 10 years.
It also provides for a short window to those holding overseas assets to declare their wealth, pay taxes and penalties to escape punitive action.
