Presenting the Union Budget 2016-17 in the Lok Sabha today, finance minister Arun Jaitley proposed a scheme to declare undisclosed income by paying 45 per cent tax in a given compliance window.
Jaitley proposed a limited period compliance window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions. This will include paying tax at 30 per cent and surcharge at 7.5 per cent and penalty at 7.5 per cent, which is a total of 45 per cent of the undisclosed income.
Regarding income declared in these declarations, there will be no scrutiny or enquiry under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions.
The surcharge levied at 7.5 per cent of undisclosed income will be called 'Krishi Kalyan surcharge' which will be used for agriculture and rural economy.
The government plans to open a window under this Income Disclosure Scheme from 1 June to 30 September 2016 with an option to pay amount due within two months of declaration.
Jaitley reiterated the government's commitment to remove black money from the economy. He also suggested that as this one opportunity for evaded income to be declared once is given, government will be further focusing on bringing people with black money to books.
Bad and doubtful debts
Jaitley said non-banking financial companies will be eligible for deduction to the extent of 5 per cent of income in respect of provision for bad and doubtful debts.
He said that determination of residency of foreign company on the basis of place of effective management (POEM) will be deferred by one year and reiterated commitment to implement General Anti Avoidance Rules (GAARs).
He further proposed exemption of service tax on services provided under Deen Dayal Upadhyay Gramin Kaushalya Yojana and services provided by assessing bodies empanelled by ministry of skill development and entrepreneurship.
He also announced exemption of service tax on general insurance services provided under Niramaya Health Insurance Scheme launched by National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability.