Black money compliance window opens

The government today opened a 4-month disclosure scheme for domestic black money holders to come clean. The Income Declaration Scheme provides one-time opportunity to domestic black money holders to come clean by paying tax and penalty of 45 per cent on such assets.

"I will advise all those who have any undisclosed asset to declare it and pay the tax and sleep well. Otherwise, the way the disclosures are becoming more and more public, they will run into serious trouble," Jaitley had said in an interview with PTI from Tokyo recently.

The government also published advertisements in all major newspapers stating ''Your undisclosed income is a time bomb ''

However, the scheme is not meant for those who have earned money through corruption.

Last year, the government had launched a similar scheme giving opportunity to people having unaccounted assets abroad to come clean by paying taxes and penalty.

Another major budgetary proposal, the Direct Tax Dispute Resolution Scheme, which seeks to resolve cases pending in various courts, tribunals, arbitrations or are in mediation under the Bilateral Investment Protection Agreement (BIPA), will take effect from today.

The scheme provides an opportunity for settlement of cases emanating from retrospective amendment of tax laws, by asking companies to pay the basic tax demand and get waiver on interest and penalty.

Experts view the scheme as a big step towards tax reform and hope that it would act as a breather for companies like Vodafone and Cairn, which have been facing multi-billion dollar tax liability following retrospective tax amendments made in 2012.

Highlights of the Under the Income Declaration Scheme 2016:

  • Under the scheme, the income declared will be taxed at the rate of 30 per cent plus a 'Krishi Kalyan Cess' of 25 per cent on the taxes payable and a penalty at the rate of 25 per cent of the taxes payable, which add up to 45 per cent of the income declared under the scheme;
  • Hoarders of black money will be able to make such declarations till 30 September and the taxes, surcharge and penalty should be paid by 30 November;
  • The declarations can either be made online on the official e-filing website of the income tax department or before the various regional Principal Commissioners of I-T;
  • According to a circular issued by the ministry of finance, the declarant will be liable for capital gains tax on the sale of such assets in future;
  • Declarations made under the scheme will not be used against the persons under the Income-Tax Act or Wealth Tax (now abolished). There will also be an immunity from Benami Transactions (Prohibition) Act;
  • As per the scheme, a person cannot declare undisclosed income which has been acquired from money earned through corruption. The scheme will not apply in relation to the prosecution of any offence punishable under the Prevention of Corruption Act, 1988;
  • If the declarant fails to pay the entire amount of tax, surcharge and penalty within the specified date (November 2016) the declaration will be considered as void. If that happens, the provisions of the Income-Tax Act will apply in respect of such income as they apply in relation to any other undisclosed income.

The compliance window for black money was first announced in the Union Budget earlier this year as one of the pivotal steps to fish out black money from the domestic economy.