The government is likely to give a compliance window of three to six months for those having unaccounted foreign income and assets, to escape prosecution under the proposed law in this regard.
"We want to make sure that from the next year onwards, tax payers are disclosing their foreign assets," said a highly placed source.
Last week, the government had introduced the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill (black money Bill in popular parlance) in the Lok Sabha. It applies to both undisclosed foreign income and assets.
The government proposes to make the Bill effective from the assessment year starting April 2016. The Bill provides a short one-time compliance window to disclose foreign assets and accounts, to avoid prosecution. However, they have to give 60 per cent of the value of those assets (30 per cent tax, 30 per cent penalty). This one-time window isn't extended to accounts and entities against which the government and the income tax department have already launched prosecution or probes. As such, the 1,000-plus names disclosed in the HSBC Geneva list would not be able to avail of it.
The government refused to term this compliance window an amnesty or immunity scheme, since the assessee would not only be paying tax but also a penalty.
Sanjay Sanghvi, partner at Khaitan and Co, believes a window of six months would be good enough for taxpayers to comply and disclose. However, he said, the government needed to iron out certain issues.
"The Bill states that the taxpayer would be required to make the disclosures in a format that would be notified at a later stage. Unless tax payers are aware of the format, they would be jittery in coming forward with disclosures as and when it is notified," he said.
The Bill also states that any misrepresentation or suppression of facts, found at a later stage, would form the grounds for rejection of an application, he said. "This provision should be amended that any application made in good faith should not be prosecuted at a later stage, unless there are reasons to believe that there has been a deliberate attempt to conceal facts," said Sanghvi.
Sources said the government aimed to pass the Bill in the current session of Parliament, when it re-convenes after a break. "It is a money Bill and would not require clearance from the Rajya Sabha (where pro-government parties are a minority)," said a source. However, the corresponding amendments in the Prevention of Money Laundering Act are not a part of a money Bill and would need clearance of both chambers. The Bill proposes that wrongful disclosure and tax evasion be made a punishable offence and would attract a jail term up to 10 years.
"The power of criminal proceedings would be vested with the enforcement directorate. However, handling such power would require additional capacity building for the body," said a source in the finance ministry.