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The government on Monday said there would be stringent penalties and a jail term of up to 10 years for non-disclosure of overseas income and assets. It added the tax authorities would be able to retrieve information of assets from foreign countries from 2017 onwards.
In the ‘Frequently Asked Questions (FAQs)’ on the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, the finance ministry has said if undisclosed assets are unearthed by the tax department at a future date, 120 per cent tax and penalty combined would be levied on its fair market value on that date, besides a three- to 10-year jail term.
“India is expected to start receiving information through the Automatic Exchange of Information (AEOI) route under FATCA (Foreign Account Tax Compliance Act) from the US later in year 2015. Further, under the multilateral agreement, India will start receiving information from other countries under the AEOI route from 2017 onwards,” the FAQs posted on the income tax department’s online portal said.
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“As on March 18, 58 jurisdictions (including India) have committed to share information under AEOI by 2017. A further 36 jurisdictions have committed to share by 2018, including jurisdictions which have beneficial tax regime,” it said.
“The multilateral agreement is expected to cover all countries in the near future. The information under the AEOI will include information of controlling persons (beneficial owners) of the asset. The possibility of discovery of an undisclosed asset may arise at any time in the future,” the FAQs added.
The circular said where any asset has been acquired prior to the commencement of the Act and no declaration has been made, such asset shall be deemed to have been acquired in the year in which it comes to the notice of the assessing officer and the provisions of the Act shall apply accordingly.
As reported earlier, the Centre will give immunity from prosecution under Foreign Exchange Management Act, Prevention of Money Laundering Act and four other laws to persons declaring undisclosed foreign assets under the compliance window, which lasts till September 30, 2015, and dues under which can be paid till December 31, 2015.
The one-time 90-day compliance window being provided will, however, not guarantee immunity for wealth generated from corruption, the FAQs clarified.
On the provision of the compliance rules barring persons against whom the government has prior information for making disclosures, the circular clarified such persons’ declarations will be dealt with under the Income Tax Act and not under the stringent Black Money law. This concession will be available only to persons who had not received any intimation from the tax department having prior information about their foreign assets.
Persons making declarations will be intimated by October 31, a month after the closure of the compliance window. In case they do not receive any such intimation, they will have to pay 30 per cent tax and an equivalent amount of penalty by December 31.
The FAQ said if the undisclosed asset has been acquired out of the proceeds of sale of protected animals, the person will not be eligible for immunity under the Wildlife (Protection) Act, 1972. The offence of wilful attempt to evade tax will also not be an offence under the Prevention of Money Laundering Act (PMLA), it added.
Tax experts and analysts have raised concerns about the lack of immunity from PMLA, especially with the Black Money Act proposing to amend PMLA to include tax evasion in relation to undisclosed foreign income and assets under the proposed legislation as a scheduled offence.
Senior government officials have sought to dispel the concern, saying the four laws cited in the Act are enough to safeguard against any later prosecution under other laws. They say PMLA can only be invoked if there is a predicated offence committed with regard to the money.
The FAQs clarified that persons can take advantage of the compliance window to declare those foreign assets for which no notices have been served by the tax authorities till June 30, 2015, or about which the government has no prior information.
On whether a declaration can be made of undisclosed assets, which have been assessed to tax and the case is pending before an Appellate Authority, the ministry said: “The declarant is not entitled to re-open any assessment or reassessment made under the I-T Act. Therefore, he is not entitled to avail the tax compliance in respect of those assets.
“However, he can voluntarily declare other undisclosed foreign assets which have been acquired or made from income not disclosed and consequently not assessed under I-T Act.” With regard to applicability of the capital gains tax on foreign assets declared by assessee, the FAQs said: “The declarant will be liable for capital gains under the income-tax Act on sale of such asset in future.”
The FAQs said it is advisable to declare all undisclosed foreign assets even if the fair market value as computed in accordance with rules comes to nil. “This may avoid initiation of any inquiry under the Act in the future in case such asset comes to the notice of the assessing officer,” it added.
It also clarified that a person who lived abroad and acquired the asset out of his income chargeable to tax in India would be required to declare them under the black money law. He or she will not be required to declare his assets if he had acquired them from income, which was not chargeable to tax in India.
“However, if such a declaration is made and in an event it is found that the asset represented money earned through corruption, it would amount to misrepresentation of facts and the declaration shall be void... If a declaration is held as void, the provisions of the Act shall apply in respect of such asset as they apply in relation to any other undisclosed foreign asset,” it added.
It clarified that the persons would be required to disclose their assets acquired out of undisclosed income even if they had been disposed of and were not held on the date of declaration.
| FAQS ON THE BLACK MONEY ACT |
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