Lok Sabha today passed the `Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015', a legislation that seeks to check the menace of black money stashed abroad through high monetary penalty and criminal prosecution.
The bill prescribes that such income will be taxed under stringent provisions of the new legislation and not under the Income-tax Act.
The government, however, allayed fears that innocent people could be harassed under the proposed "deterrent" law.
Piloting the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, in the House, finance minister Arun Jaitley said there would be short compliance window for persons having undisclosed income abroad to come clean by paying 30 per cent tax and 30 per cent penalty.
There could be a two-month window to declare overseas assets and within six months one would have to pay tax and penalty, he said.
Once the compliance window closes, anyone found having undeclared overseas wealth would be required to pay 30 per cent tax, 90 per cent (of tax) penalty and face criminal prosecution, he said.
The offence will be non-compoundable and the offenders will not be permitted to approach the Settlement Commission for resolution of disputes. The offender also faces imprisonment of up to 10 years.
The enforcement agencies will be able to attach and confiscate the accounted assets held abroad and launch proceedings.
It also seeks to make non-filing of income tax returns or filing of returns with inadequate disclosure of foreign assets liable for prosecution with punishment of rigorous imprisonment of up to 7 years.
To protect persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance, it has been provided that failure to report bank accounts with a maximum balance of up to Rs5 lakh at any time during the year will not entail penalty or prosecution.
The tax liability on an overseas property would be computed on the basis of its current market price, not the price at which it was acquired.
The bill provides for a short window for those holding overseas assets to declare their wealth, pay taxes and penalties to escape punitive action. Failure to furnish return in respect of foreign income or assets shall attract a penalty of Rs10 lakh. The same amount of penalty is prescribed for cases where although the assessee has filed a return of income, but he has not disclosed the foreign income and asset or has furnished inaccurate particulars of the same.