The Central Board of Direct Taxes (CBDT) has made it clear that black money declarants using the one-time compliance window cannot pay taxes and penalty out of undisclosed incomes without including the same in income declared.

In effect, no immunity would be available under the Income Disclosure Scheme 2016 to such declarants for payments – whose source is undisclosed incomes – made to the government. Simply put, black money declarants cannot look to bring down their effective tax rate — from 45 per cent to say 31 per cent – through the use of undisclosed incomes for payment of taxes and penalties.

A clarification to this effect has come from CBDT as part of the fourth set of frequently-asked-questions (FAQs) on the Income Declaration Scheme 2016 To support its stance, the FAQ has also provide an illustration,

The Modi government had announced a four-month window starting from June 1 to persons holding undeclared income to come clean by forking out a tax of 30 per cent and interest and penalty of 7.5 percent each, totalling to 45 percent.

Meanwhile, the Centre has extended the deadline for payment of tax and penalty under the black money disclosure scheme. Declarants can now pay the amount in three instalments by September 30 next year. The first instalment (tax, surcharge and penalty) of 25 per cent will have to be paid by November 2016 to be followed by another instalment of 25 per cent by March 31 next year. The remaining amount will have to be paid to the exchequer by September 30, 2017.

Prior to this change, declarants had to pay the tax, surcharge and penalty were required to be paid by November this year,

The payment deadline has been extended following representation made by stakeholders’ that the time period announced by the government was “very short”.

The CBDT had also last week notified that the information provided to the Income Tax Department under the Income Declaration Scheme, 2016, will not be shared with any other tax or law enforcement agency.

Also, the CBDT has said that information will not be shared within the Income Tax Department for any investigation in respect of a valid declaration.

Full confidentiality

To maintain full confidentiality of declarations under the black money compliance window, Revenue Secretary Hasmukh Adhia said the government is considering a plan to allow people from across the country to declare their unassessed income at any of the four metropolitan cities of Delhi, Mumbai, Kolkata and Chennai.

“We are very shortly planning to provide this facility,” he said on Thursday at a seminar at FICCI, trying to assuage concerns that people who use the scheme may be harassed by tax officials in their cities.

He also stressed that the CBDT has now clarified that the effective tax rate under the scheme is 45 per cent. He also warned evaders who did not use the compliance window that the Benami Transactions (Prohibition) Amendment Bill is likely to be taken up by Parliament in the Monsoon Session and will tighten provisions of the Act.