This Tax Alert summarizes a Circular issued by the Central Board of Direct Taxes (CBDT), which contains further clarifications in frequently-asked-questions (FAQs) format along with principles with assistance of certain case studies relating to a one-time compliance window for undisclosed foreign assets under The Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Act, 2015 (Act).
Earlier, CBDT had released clarifications to 32 queries in relation to scope of the one-time compliance window scheme (Scheme) .
This is the second set of clarifications released by CBDT to further address various concerns raised on the operation and mechanics of the Scheme. Clarifications provides useful guidance in respect of declaration of undisclosed overseas bank account, scope of immunity provisions, declaration of undisclosed overseas assets held by overseas trust, confidentiality of declaration etc.
The Circular further addresses many concerns of the taxpayers and provides useful guidance in the matter of the Scheme. The Circular reiterates that assets acquired out of income not chargeable to tax in India either under the ITL or tax treaty will not constitute undisclosed foreign asset. However, any accretion to the asset in the form of chargeable income will need declaration for the requisite immunity.
The Circular provides number of clarifications in respect of declaration of undisclosed foreign bank account e.g.- (i)declaration on best estimate basis in case of bonafide non-availability of bank statements; (ii) extent of explanation regarding entries in bank account; (iii) no double jeopardy, persons who need to make declaration in case of joint accounts etc. Clarifications in respect of confidentiality of declaration and relaxing requirement of furnishing valuation report along with declaration are also welcome.
The Circular also re-emphasizes that taxpayer will not be eligible to claim foreign tax credit in respect of undisclosed income. Also, immunity is granted only with respect to the specified Acts and will not extend in case of other laws such as SEBI and IPC.
Also, clarification is harsh to the extent that employer is being made liable to interest and penalty for default in tax withholding on undisclosed salary income declared by employee.
It may be noted that, under Indian jurisprudence, a circular issued by CBDT, for proper administration, is binding on the Tax Authority even if it is contrary to legal provisions. This Circular, however, will not bind taxpayers or the Courts.