Persons who have made money through corruption cannot take advantage of the four-month disclosure window on domestic black money, beginning June 1, to declare unaccounted income to come clean, the Finance Ministry said.
The Income Declaration Scheme allows assessees who have not paid taxes on their income in the past to disclose it by September 30 and pay taxes, penalty and surcharge totalling 45 per cent at the fair market value by November 30.
The 14-Frequently Asked Questions (FAQs) and a circular issued by the Finance Ministry said declarations made under the scheme will remain confidential and will not be used against the declarants under the Income-Tax Act or Wealth Tax (now abolished). There will also be an immunity from Benami Transactions (Prohibition) Act.
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The declarant, the FAQ said, will be liable for capital gains tax on sale of such assets in future.
On a question whether a person can declare undisclosed income which has been acquired from money earned through corruption, the FAQ said "No".
The scheme will not apply in relation to prosecution of any offense punishable under the Prevention of Corruption Act, 1988.
"Therefore, declaration of such undisclosed income cannot be made under the scheme," it said, adding such declaration will amount to misrepresentation of facts and hence void.
As per the FAQ, if a declaration is held as void, the provisions of the Income-tax Act will apply in respect of such income as they apply in relation to any other undisclosed income.
The scheme for domestic black money holders follows a similar one for those having undisclosed foreign assets.
Individuals, HUF, company, firm and any association can take advantage of the income declaration scheme announced in the Union Budget to fish out black money from the domestic economy.
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As per the circular issued by the Central Board of Direct Taxes (CBDT), if the declarant fails to pay the entire amount of tax, surcharge and penalty within the specified date (November, 2016) the declaration will become void.
"Where the declaration is held to be void for any of the above reasons, it shall be deemed never to have been made and all the provisions of the Income-tax Act, including penalties and prosecutions, shall apply accordingly," it said.
The FAQ said it is not mandatory to file the valuation report of the undisclosed asset along with the declaration.
"However, the declarant should have the valuation report. While e-filing the declaration on the departmental website a facility for uploading the documents will be available," it said.
The Finance Ministry said the FAQs are first part of taxpayer education series in the form of question and answers specifying details of the scheme and clarifying eligibility available under the same.
"These will be updated from time to time based upon feedback and further queries received," it said.
The FAQs further said the persons can declare undisclosed income for previous years regarding which no notices have been served on them by the Income-Tax Department.
"The declarant will not be eligible for declaration under the scheme where the undisclosed income relates to the assessment year where a notice ... Has been issued and served on the declarant on or before May 31, 2016," it said.
Also, in case of survey operation the person is barred from making a declaration under the scheme in respect of an undisclosed income in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed income of any other previous year.
The scheme is not available for undisclosed income which has been assessed to tax and the case is pending before an Appellate Authority.
The amount of undisclosed income declared will not be included in the total income of the declarant for any assessment year.
