With unaccounted ‘black’ money taking centre-stage in political discussion, the Budget on Saturday announced two laws to prosecute those having money illegally abroad and doing benami transactions in India.
One of these laws will tighten the noose on banks, financial institutions and individuals abetting a person to hide foreign accounts. Besides, two amendments will be made in the Income Tax Act to curb circulation of black money in real estate. No immunity scheme is proposed..
Read our full coverage on Union Budget
Finance Minister Arun Jaitley said he proposed to introduce a comprehensive Bill on black money in the current session of Parliament. It will specifically deal with money stashed abroad.
Recently, HSBC India had come under the scanner of investigative agencies for allegedly helping clients launder money.
The measure proposed in the Budget will provide for prosecution and rigorous imprisonment up to 10 years for those concealing income and assets, and evading tax on foreign assets. These offences will be non-compoundable and the offenders will not be permitted to approach the Settlement Commission.
Partner with Deloitte India Rajesh Gandhi said the proposed Bill will have harsher provisions covering those having undisclosed income abroad; some of the provisions exist in the Income Tax Act.
Besides, the penalty for such concealment of income and assets will be levied at 300 per cent of tax.
The proposed law will also provide for prosecution of those not filing returns on, or filing returns with inadequate disclosure of foreign assets. They will be liable for up to seven years’ rigorous imprisonment.
Income from undisclosed foreign assets will be taxed at the maximum margin rate of 30 per cent and will have a surcharge. No exemptions or deductions would be allowed.
The owner or beneficiary of foreign assets will have to mandatorily file returns, even if there is no taxable income. Those abetting offenders — whether individuals, entities, banks or financial institutions — will be liable for prosecution and a penalty.
|CRACKING THE WHIP|
An assessee will have to mandatorily mention the date of opening of foreign accounts in an income tax return.
The offence of concealment of income or tax evasion in relation to foreign assets will be made a predicate offence — meaning a crime that provides resources for other criminal acts such as money laundering. As such, these will be taken as offences under the Prevention of Money Laundering Act (PMLA). This will enable enforcement agencies to attach and confiscate unaccounted assets held abroad and prosecute persons involved in laundering of black money.
PMLA will be further amended to enable attachment and confiscation of equivalent assets in India when the assets located abroad cannot be forfeited.
Besides, the Foreign Exchange Management Act (Fema), will be amended to enable action against the holder of foreign exchange, foreign security or any immovable property outside India in contravention of the law.
Tax partner at KPMG in India Vikas Vasal said, “Stringent penal provisions, including penalty and imprisonment, have been provided for concealment of income and assets. Simultaneous changes proposed in the other statutes, like Fema, clearly show the tough stand being adopted by the government to deal with such cases.”
On circulation of black money in the domestic economy, the minister announced a new and comprehensive Benami Transactions (Prohibition) Bill would be introduced in the current session of Parliament. This law will enable confiscation of benami property and provide for prosecution, blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate.
There is a Benami Transactions (Prohibition) Act, 1988. Jaitley said at a later interview that the law had become defunct, necessitating new legislation.
Two provisions of the Income Tax Act will be amended to counter payments for immovable property in excess of Rs 20,000 in cash.