New black money scheme proposed; pay 50% tax on unaccounted deposits or 85% if caught

New Delhi: Providing a window to black money holders, the government on Monday proposed to levy a total tax, penalty and surcharge of 50 percent on the amount deposited post demonetisation while higher taxes and stiffer penalty of up to 85 percent await those who don’t disclose but are caught.

Nearly three weeks after Prime Minister Narendra Modi announced junking high denomination 500 and 1000 rupee notes, Finance Minister Arun Jaitley introduced a bill to amend the Income Tax law which also provides for black money declarants a mandatorily depositing of 25 percent of the amount disclosed in anti-poverty scheme without interest and a four-year lock-in period.

Those who choose to declare their ill-gotten wealth stashed till now in banned 500 and 1000 rupee notes under the Pradhan Mantri Grabi Kalyan Yojana 2016, will have to pay a tax at the rate of 30 percent of the undisclosed income.

Additionally, a 10 percent penalty will be levied on the undisclosed income and surcharge called PMGK Cess at the rate of 33 percent of tax (33 percent of 30 percent).

Further, the declarants have to deposit 25 percent of the undisclosed income in a scheme to be notified by the government in consultation with the Reserve Bank of India (RBI).

The money from the scheme would be used for projects in irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood so that there is justice and equality, said the Statement of Objects and Reasons of the Bill.

For those who continue to hold onto undisclosed cash and are caught, existing provisions of the Income Tax law will be amended to provide for a flat 60 per cent tax plus a surcharge of 25 per cent of tax (15 per cent), which will amount a levy of 75 percent.

Besides, if the assessing officer decides he can charge a 10 percent penalty in addition to the 75 percent tax.

The current provisions of penalty on under-reporting of income at 50 percent of the tax, and misreporting (200 percent of tax) will remain and no changes are being made to them.

Under-reporting/misreporting income is normally difference between returned income and assessed income.

The Taxation Laws (Second Amendment) Bill, 2016 proposes to amend Section 115BBE of the Income Tax Act to provide for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.

Against current provision of 30 percent flat tax rate plus surcharge and cesss, a steep 60 percent tax will be levied on such income together with 25 percent surcharge of tax (15 percent of such income). So total incidence of tax will be 75 percent with no expense, deductions or set-off allowed.

Also, the assessing officer can levy an additional 10 percent penalty, taking the total tax incidence to 85 percent.

The current provisions for penalty in cases of search and seizure are proposed to be amended to provide for a penalty of 30 percent of income if it is admitted, returns filed and taxes paid. In all other cases, 60 percent will be the penalty.

Currently, the penalty is 10 percent of the income, if the income is admitted, returned and taxes are paid. Penalty is at 60 percent in all other cases.

Deposits which have been already made from November 10 will be covered under PMGKY. “Last date we will notify after the bill is passed but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016,” he said.

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Source:Zee news

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