One-time Compliance window procedure and valuation mechanism for undisclosed overseas assets prescribed

 

This Tax Alert summarizes a recent circular  issued by Central Board of Direct Taxes (CBDT) containing explanatory notes on provisions under The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015 (Act) relating to one-time tax compliance for undisclosed foreign income and assets. The Tax Alert also summarizes recent notification   issued by CBDT on The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Rules, 2015 (Rules).

 

The Act was introduced with the object of tackling menace of undisclosed overseas income/asset. The Act which is effective from 1 July 2015 applies to persons who are residents of India (other than not ordinarily residents) and contains stringent provisions in the form of levy of 30% tax and 3 times penalty along with initiation of prosecution proceeding which can lead to punishment for a time frame ranging from 3-10 years. Considering the stringent nature of the provisions, the Act offers one-time compliance window for a limited period as an opportunity for taxpayers to come clean and voluntarily disclose overseas undisclosed assets relating to tax year prior to 2015-16 . Under this facility, once the taxpayer pays tax at 30% on value of undisclosed foreign assets and equal amount of penalty, the taxpayer is immune from any other consequence under the Act.

 

The circular explains in brief the one time compliance scheme and prescribes procedure of filing declaration and related aspects. One time compliance window is available for a short period wherein the declarant will need to furnish declaration of undisclosed overseas assets to the tax authority by 30 September 2015 and pay up of taxes and penalty thereon by 31 December 2015.

 

The Rules prescribe valuation methods for various assets as also prescribe forms for certain procedural matters. Valuation mechanism will apply for determining value of undisclosed overseas assets for one-time compliance window with valuation date being 1 July 2015, and will apply also to normal assessment proceedings under the Act with valuation date being 1 April of previous year in which undisclosed asset comes to the notice of the tax authority.