Tough Black Money law exempt those under investigation from getting any leeway

Those under investigation for unaccounted foreign assets allegations won’t get the benefit of a one-time disclosure window under the new black money law if the government had prior information about this, according to detailed rules on the last chance being offered to people looking to come clean.

Hence, those under the so-called HSBC list won’t get any leeway.

On the other hand, those who declare such assets during the disclosure period won't find themselves being prosecuted under other laws based on this information. Assets will have to be valued in general at cost or fair market value on the valuation date, whichever is higher, according to the rules issued by the finance ministry on Friday. The government is giving black money holders one last chance to pay 30 per cent tax and 30 per cent penalty to escape the law that provides for imprisonment of three to 10 years for undisclosed foreign assets or income.

Disclosures can be made from July 1 to September 30, with another three months ending December 31 to pay up, the government said earlier this week. The law came into force on July 1. "Considering the stringent nature of the provisions of the new law... (it) 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 finance ministry said in the explanatory statement on the window.

Any statement in which the assessee fails to pay tax or misrepresents facts will be deemed invalid and treated as a non-declaration, inviting the harsh provisions of the law passed in the budget session.

It is a very simple and clear compliance scheme that has been given in line with the letter and spirit of the law, said Revenue Secretary Shaktikanta Das.

The government has not promised any confidentiality to those declaring undisclosed foreign assets under the black money law but said it won't be used as evidence under legislation such as the harsh Foreign Exchange Management Act (FEMA).

"The contents of the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the Income Tax Act, the Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act or the Customs Act," the government said. Also, the value of assets in the declaration won't be liable to wealth tax for any assessment year.

In the case of bank accounts, all deposits will be added up to arrive at the taxable amount but credit will be given for any withdrawals deposited back into the account. The government will accept the estimates of valuers approved by the government of the country where the asset is located. It has clarified the valuation rules through illustrations and will soon issue FAQs to make it easily understandable.

"It is time now for people to look at their existing assets/ income positions and utilise this opportunity for onetime disclosure to bring their records up to date," Amarpal Chadha, tax partner, EY India, told ET.

The government has been receiving data from various sources about foreign assets of Indians. If the revenue authorities had information about any asset on June 30, then the same has to be excluded and the declaration filed again.

In respect of such assets, the one-time opportunity will be denied and action taken under the law. Additionally, those already under income tax investigation before June 30 or against whom survey and search have been conducted and proceedings are still on on will not be able to use this opportunity.

The disclosure under this window can be made for any undisclosed asset located outside India and acquired from income chargeable to tax under the Income Tax Act for any assessment year prior to that of 2016-17. A senior government official told ET the law allows the tax authorities to go back 16 years. Experts said the rules were reasonable and should encourage people to declare such assets.

"This indeed is a one-time opportunity and the taxpayer needs to make sure to make the correct disclosure," said Kuldip Kumar, partner at PwC. "Any misrepresentation or suppression of facts or information will make the declaration void as if such declaration was never made and tax payer would be subject to the penal consequences under the Act. Further, the amount of tax and penalty paid would also not be refunded."

The declaration may be filed with the Commissioner of Income Tax, Delhi, or online through the e-filing portal.

(image credits: indiatimes)