Finance minister Arun Jaitley today proposed amendments to the Income Tax Amendments Bill in order to keep a check on huge sums of unaccounted cash deposits, post demonetisation. The amendments propose 30 per cent tax on undisclosed income, along with 10 per cent penalty and 33 per cent surcharge.
Further, a tax of 75 per cent along with 10 per cent penalty has also been proposed in case of non-disclosure in cases where income tax officials detect undisclosed wealth deposited in banks.
The amended Act also proposes that an amount of 25 per cent of the total undisclosed income be deposited in the Pradhan Mantri Garib Kalyan Deposit Scheme.
The Taxation Laws (Second Amendment) Bill, 2016, introduced in Parliament seeks to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.
Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. In the wake of declaring specified bank notes ''as not legal tender'', there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.
Finance minister Arun Jaitley today introduced amendments to the Income Tax Second Amendment bill by incorporating an alternative scheme, namely, 'Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY).
Under the scheme, the declarant will have to pay tax at the rate of 30 per cent of the undisclosed income, and a 10 per cent penalty on the undisclosed income. Further, a surcharge, to be called 'Pradhan Mantri Garib Kalyan Cess' at 33 per cent of tax is also proposed to be levied.
In addition to tax, surcharge and penalty (totaling approximately 50 per cent), the declarant will have to deposit 25 per cent of undisclosed income in a deposit scheme to be notified by the RBI under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.
Evasion of taxes deprives the nation of critical resources which could enable the government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs500 and Rs1,000 (Specified Bank Notes or SBN) have been recently withdrawn the Reserve Bank of India.
Tax officials will also look at all significant deposits of demonetised notes and check if there is unaccounted wealth or smaller deposits in a household in different family members' accounts.
"There is a Rs2.5 lakh exemption but if you have split (the money) and four family members have each deposited this amount, then it will need to be seen," said a government official.
"We would be getting reports of all cash deposited during the period of November 10 to December 30 above a threshold of Rs2.5 lakh in every account. The department would do matching of this with income returns filed by the depositors. And suitable action may follow," revenue secretary Hasmukh Adhia has said.