The Income Tax department will not ask for the source of funds deposited in banks from November 10 — post demonetisation of high value notes, if the entire income is declared and 50% taxes paid on it, Revenue Secretary Hasmukh Adhia said on Monday.
The disclosures will enjoy immunity from wealth tax, civil and other taxation laws but there will be no immunity from FEMA, PMLA, Narcotics and black money law, he said.
Nearly three weeks after Prime Minister Narendra Modi announced junking high denomination currency notes, Finance Minister Arun Jaitley has introduced a bill to amend the Income Tax law to provide for a 30% tax and a 33% surcharge on such tax plus a penalty of 10% for black money that is deposited in banks and declared.
In case the undisclosed income is detected later, a total tax and penalty of up to 85% can be levied.
"The deterrent provisions were necessary so that people have the fear of hoarding black money," Adhia said.
The disclosures made in the Pradhan Mantri Garib Kalyan Yojana (PMGKY), that attracts 50% tax, "will ensure that no questions will be asked about the source of fund. It would ensure immunity from Wealth Tax, civil laws and other taxation laws. But there is no immunity from FEMA, PMLA, Narcotics, and black money act", he said.
Deposits which have already been made from November 10 will be covered under PMGKY. "Last date we will notify after the bill is passed but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016," he said.
"We have seen that some people were trying to convert black money to black again by using new currency. So we have amended the 75-85% provision," he said.
Adhia further said that the search and seizure provisions have been amended to ensure that there is fear among people about I-T raids.
There were instances that since 10% penalty was to be paid if the unaccounted income was admitted at the time of seizure and returns were filed and taxes paid, people used to accept black money at the time of seizures.
"10% penalty fear was not acting as a deterrent and evaders were misusing the provision. So there was a need for a deterrent provision," Adhia said.
As per the amendment to Section 271AAB, now penalty would be 30% of unaccounted income detected at the stage of search and seizure is admitted and return is filed and taxes are paid. The penalty would be 60% in other cases.
In order to install fear of law in the minds of people, Adhia said the government may take more steps against black money post-December 2016 and asked people to take advantage of the PMGKY scheme.
He said PMGKY will be notified by the RBI. Proceeds from GKY will be utilised for the scheme of irrigation, housing toilet, infra, primary education, primary health, livelihood so that there are justice and equality.