Govt. issues clarifications on tax compliance for undisclosed foreign income and assets

The Central Board of Direct Taxes of the Ministry of Finance on Monday introduced a tax compliance provision related to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

According to department statement, the provision and clarifications related to it have been introduced under Chapter VI of the Act.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015 have been notified, said the department.

The CBDT said that if a firm has undisclosed foreign assets, a declaration can be made by the firm which shall be signed by the person specified in sub-section (2) of Section 62 of the Act. It also said that a partner cannot make a declaration in his name, but may file a declaration in respect of an undisclosed asset held by him.

It also said that a company which has undisclosed foreign assets, can file a declaration under Chapter VI of the Act, but added that directors of the company shall not be liable for any offence under the Income Tax Act, Wealth Tax Act, FEMA, Companies Act and the Customs Act in respect of declaration made in the name of the company.

It also said that Section 67 provides immunity from prosecution under five Acts-the Income Tax Act, Wealth Tax Act, FEMA, Companies Act and the Customs Act. However, it does not provide immunity from prosecution under any other Act.

Offences under the PMLA arise when laundering money generated from the process or activity connected with the offences specified in the schedule to the PMLA. Therefore, the primary requirement under PMLA is commission of a scheduled offence, it said.

The willful attempt to evade tax under section 51 of the Act, it added, has become a scheduled offence under PMLA.

However, where a declaration of an asset has been made under Section 59 of the Act, the provisions of Section 51 will not be applicable in respect of that asset, the CBDT statement said.

The CBDT said that a declarant will be liable for capital gains under the Income Tax Act on sale of such asset in future. It said that as per the current provisions of the Income Tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. It also said that a person will only be ineligible from declaration of those foreign assets which have been acquired during the year for which a notice under section 142/ 143(2)/ 148/ 153A/ 153C is issued and the proceeding is pending before the Assessing Officer.

He or she is free to declare other foreign assets which have been acquired during other years for which no notice under above referred sections have been issued.