download-pdfThe Ministry of Law and Justice has notified the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 which aims at dealing with the problem of the Black money (undisclosed foreign income and assets), the procedure for dealing with such income and assets and to provide for imposition of tax on any undisclosed foreign income and asset held outside India and for matters connected therewith or incidental thereto.

The Act provides for separate taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the Act. Section 85 of the Act empowers the Central Board of Direct Taxes to make rules for carrying out the provisions of this Act, which should be notified in due course.

Event Date
Introduction in Parliament 20 March 2015
Passed in Lok Sabha & Rajya Sabha 13 May 2015
President’s Assent 26 May 2015
Notification in Gazette 27 May 2015
Comes into Force on 1 April 2016

Salient Features

Scope The Act will apply to all persons resident in India.Provisions of the Act will apply to both undisclosed foreign income and assets (including financial interest in any entity).
Rate of tax Undisclosed foreign income or assets shall be taxed at the flat rate of 30 percent. No exemption or deduction or set off of any carried forward losses which may be admissible under the existing Income-tax Act, 1961, shall be allowed.
Penalties  Violation of the provisions of the Act will entail stringent penalties:

  • The penalty for non-disclosure of income or an asset located outside India will be equal to three times the amount of tax payable thereon, i.e., 90 percent of the undisclosed income or the value of the undisclosed asset. This is in addition to tax payable at 30%.
  • Failure to furnish return in respect of foreign income or assets shall attract a penalty of Rs.10 lakh. The same amount of penalty is prescribed for cases where although the assessee has filed a return of income, but he has not disclosed the foreign income and asset or has furnished inaccurate particulars of the same.
Prosecutions The Bill proposes enhanced punishment for various types of violations.

  • The punishment for willful attempt to evade tax in relation to a foreign income or an asset located outside India will be rigorous imprisonment from three years to ten years. In addition, it will also entail a fine.
  • Failure to furnish a return in respect of foreign assets and bank accounts or income will be punishable with rigorous imprisonment for a term of six months to seven years. The same term of punishment is prescribed for cases where although theassessee has filed a return of income, but has not disclosed the foreign asset or has furnished inaccurate particulars of the same.
    • The above provisions will also apply to beneficial owners or beneficiaries of such illegal foreign assets.
  • Abetment or inducement of another person to make a false return or a false account or statement or declaration under the Act will be punishable with rigorous imprisonment from six months to seven years. This provision will also apply to banks and financial institutions aiding in concealment of foreign income or assets of resident Indians or falsification of documents.
Safeguards The principles of natural justice and due process of law have been embedded in the Act by laying down the requirement of mandatory issue of notices to the person against whom proceedings are being initiated, grant of opportunity of being heard, necessity of taking the evidence produced by him into account, recording of reasons, passing of orders in writing, limitation of time for various actions of the tax authority, etc. Further, the right of appeal has been protected by providing for appeals to the Income-tax Appellate Tribunal, and to the jurisdictional High Court and the Supreme Court on substantial questions of law.To protect persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance, it has been provided that failure to report bank accounts with a maximum balance of upto Rs.5 lakh at any time during the year will not entail penalty or prosecution.Other safeguards and internal control mechanisms will be prescribed in the Rules.

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