One-time Compliance Opportunity under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015  contains stringent provisions to deal with black money. The Act seeks to levy tax on undisclosed assets held abroad by a person who is a resident in India at the rate of 30 percent of the value of such assets, provides for a penalty equal to 90 percent of the value of such assets and also provides for rigorous imprisonment of three to ten years for wilful attempt to evade tax in relation to an undisclosed foreign income or asset. 

Chapter VI of the Act, comprising sections 59 to 72, provides for a one-time compliance opportunity for a limited period to persons who have any foreign assets which have hitherto not been disclosed for the purposes of Income-tax. The one-time compliance window is available till 30th September 2015. The provisions of the one-time compliance are briefly explained as under: 

Prescribed Form for declaration 

Declaration is to be filed in Form 6 with the Commissioner of Income-tax, Delhi or online at www.incometaxindiaefiling.gov.in, latest by 30.09.2015 in respect of undisclosed foreign assets:

 Belonging to a person, who is ordinarily resident in India as per the provisions of Section 6(6) of Income-tax Act (IT Act).

 Acquired from income chargeable to tax under IT Act for any assessment year prior to the AY 2016-17, which has not been offered to tax. 

Declaration not eligible in certain cases 

1. Undisclosed foreign assets acquired out of income pertaining to any assessment year in respect of which notice u/s 142 or 143 or 148 or 153A or 153C of the IT Act has been served upon the person on or before 30.06.2015 and proceeding thereof is pending before the Assessing Officer. 2. Where there has been either a search u/s 132 or a requisition u/s 132A or a survey u/s 133A of the IT Act and time for issuance of notice u/s 143(2) or 153A or 153C thereof has not expired. 3. Where the Competent Authority has already received information relating to the undisclosed assets under declaration by virtue of agreement entered into by the Government u/s 90 or 90A the of IT Act. 4. A person in respect of whom proceedings for prosecution of any offence punishable under Chapter IX (offences relating to public servants) or Chapter XVII (offences against property) of the Indian Penal Code or under the Unlawful Activities (Prevention) Act or the Prevention of Corruption Act are pending. 

Essentials of a valid declaration 

1. Pay tax @30% and a penalty @30% of the value of such undisclosed asset by 31.12.2015. 2. Ensure that there is no misrepresentation or suppression of facts or information in the declaration. 

(Failure to comply with any of the above conditions would render the declaration to be void. However, any tax or penalty paid in pursuance of the declaration so made shall be forfeited.) 

Issuance of intimation to the declarant 

The designated Principal CIT/CIT shall issue an intimation by 31.10.2015, stating whether any information in respect of the declared asset had been received by him on or before 30.06.2015 under an agreement entered into by the Government u/s 90 or 90A of the IT Act. 

Filing a revised declaration 

Where any such information under an agreement entered into by the Government u/s 90 or 90A of the IT Act had been received by the Competent Authority, the declarant shall file a revised declaration in Form 6 excluding such asset, within 15 days of the receipt of intimation. 

Acknowledgment in Form 7 

After the intimation of payment by the declarant, the Principal CIT/CIT will issue an acknowledgement in Form 7 of the accepted declaration within 15 days of such intimation of payment by the declarant. In all cases, the declarant is required to pay the requisite tax and penalty on the assets eligible for declaration latest by 31.12.2015 

Effect of a valid declaration 

Where a valid declaration as detailed above has been made, the following consequences will follow: (a) The amount of undisclosed investment in the asset declared shall not be included in the total income of the declarant under the IT Act for any assessment year; 

(b) The contents of the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the IT Act, the Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act and the Customs Act; 

(c) The value of asset declared in the declaration shall not be chargeable to Wealth Tax for any assessment year or years. (d) Declaration of undisclosed foreign asset will not affect the finality of completed assessments. The declarant will not be entitled to claim re-assessment of any earlier year or revision of any order or any benefit or set off or relief in any appeal or proceedings under the Act or under IT Act in respect of declared undisclosed asset located outside India or any tax paid thereon. 

The Key 

The global automatic information exchange system will come into effect 2017 which will ease of exchange of information regarding between countries in respect of assets of persons outside India. Before the exchange of information system comes into effect, the Black Money Act encourages people who have undisclosed income and assets outside India to make a voluntary disclosure and take benefit of a reduced rate of penalty @ 30% on the value of the assets as against the rate of 90% as provided for in the said Act. The Act further provides immunity from prosecution under five Acts viz. IT Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act. The Government has brought in The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to address the problem of Black money stashed overseas. Though critics of this law have pointed out various shortcomings, only time will tell how effective this will be in meeting its objective.