Once the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill (black money Bill in popular parlance) is implemented, income tax assessees will not only have to disclose their foreign assets and accounts but also the beneficial owners or nominees of these. This will help the government track those stashing unaccounted money abroad.
"For this, income declaration forms will have a separate column for details of foreign assets, accounts and the beneficial owner or nominee," said a senior official.
For the past two years, income tax returns required declaration of foreign income alone.
Last week, the government had introduced the black money Bill in the Lok Sabha; this is applicable to both undisclosed foreign income and assets. It has been proposed the Bill be made effective April 1, 2016.
The Bill defines undisclosed assets as those held by taxpayers and beneficial owners. "Based on a reading of the Bill, it appears these provisions will have far-reaching implications," said Tapati Ghosh, partner, Deloitte Haskins & Sells.
A release by the Press Information Bureau (PIB) somewhat complicated the matter. It not only mentioned beneficial owners, but also beneficiaries, which experts say might further widen the net to cover indirect beneficiaries. "The provisions would also apply to beneficial owners, beneficiaries of illegal foreign assets," Ghosh said, citing the PIB release.
The black money Bill, however, mentions only beneficial owners, not beneficiaries.
The Bill entails stringent penalties and prosecution in case of non-disclosure, including a penalty of 90 per cent of the undisclosed income or value of the asset and imprisonment of up to 10 years. The Bill would be taken up by Parliament in the second half of the Budget session, starting April 20.
The Bill provides a short window to taxpayers 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.
This means about 1,000 people on an HSBC list (of Indians allegedly having unaccounted money in HSBC's Geneva branch) might not be able to avail of this window.
"Once a person voluntarily discloses any undisclosed foreign asset under the one-time window provided in the Bill, in my view, his family members who are beneficial owners of that foreign asset cannot be subsequently and separately investigated upon and prosecuted. This is because in the voluntary disclosure, their relationship with the foreign asset would have been disclosed and tax paid thereon," said Sanjay Sanghvi, partner, Khaitan & Co.