Those with foreign bank accounts or assets may get up to six months to disclose them and avoid prosecution, a higher penalty and imprisonment.
The six-month compliance window will come into effect from the date notified, after the black money Bill is passed by Parliament, a senior Finance Ministry official said. “This window will not be for more than six months,” the official clarified.
People using the six-month window will be allowed to declare their foreign accounts/assets before the tax authority within a specified period, followed by payment of tax of 30 per cent and an equal amount by way of penalty.
In addition, there will be a penalty equal to three times the amount of tax payable thereon. There will be no exemption, deduction or set off of any carried forward losses.
This ‘compliance window’ is part of the new Undisclosed Foreign Income and Assets (imposition of Tax) Bill, 2015, which will be taken up for consideration and passage in the Lok Sabha next week. It will cover all Indians and be applied to both undisclosed income and assets (including financial interest in any entity) stashed abroad.
The Bill provides for separate taxation of any undisclosed income in relation to foreign income and assets, under the stringent provisions of the new legislation and not the Income-tax Act. Once a person declares his income and assets and pays the penalty, he will be immune from prosecution.
The disclosure will not be used as evidence against the assessee under the Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act or the Customs Act. Wealth Tax will also not be payable.
‘No amnesty’However, the government has clarified that this is not an amnesty scheme, as no immunity from penalties is being offered.
Another senior Finance Ministry official said that the Bill aims to catch the “big fish” and not “every Tom, Dick and Harry” with a foreign bank account.
There is a provision that says not reporting a foreign bank account with a balance up to ₹5 lakh will not attract a penalty or prosecution. “₹5 lakh means less than $10,000, which could be normal for a person who goes abroad to study,” he explained.
The Bill will come down hard on wilful tax evaders, for which there will be rigorous imprisonment from three to 10 years, besides a fine. A person not filing a return in respect of foreign assets/accounts/income will be punishable with rigorous imprisonment ranging from six months to seven years.
There is also a fine up to ₹10 lakh for not filing returns or hiding/giving inaccurate information in returns.