Proof of tax paid, 4-year money lock-in must for new tax evasion amnesty

Blackmoney holders keen to avail themselves of the new tax evasion amnesty scheme will have to first deposit 49.9 per cent tax and park a quarter of their unaccounted cash in zero—interest deposit before being able to apply for it.

The Pradhan Mantri Garib Kalyan Yojana, 2016, which provides last chance to holders of undisclosed income in the form of old 500 and 1,000 rupee notes to come clean, will not be applicable to any person facing prosecution for corruption, holding benami property, money laundering, violation of foreign exchange or drug trafficking.

In a clarification on Provisions of the Taxation and Investment Regime for PMGKY, CBDT said the scheme will not be applicable to anyone facing charges under the Foreign Blackmoney Act.

“The provisions of this scheme shall not apply in relation to any person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974,” it said.

This is also not applicable to cases of detention orders in relation to prosecution for any offence punishable under the Narcotic Drugs and Psychotropic Substance Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property Transaction Act, 1988 and the Prevention of Money—Laundering Act, 2002.

Additionally, the provisions will not cover “any person notified under Section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992“.

CBDT promised that the content of the declarations made shall not be admissible as evidence against the declarant under any Act other than the exceptions listed above.

I-T said that upon making a valid declaration, the amount of undisclosed income declared will not be included in the total income of the declarant under the Income Tax Act for any assessment year.

“A declaration shall be void and shall be deemed never to have been made where a declaration has been made by misrepresentation or suppression of facts or without payment of tax and surcharge of penalty or without depositing the requisite amount in the PMGKY Deposit Scheme, and in such cases, all the provisions of the Income—Tax Act, including penalties and prosecutions, shall apply accordingly,” it said.

The scheme provides an opportunity to persons having undisclosed income in the form of cash or deposit in an account maintained with a specified entity (which includes banks and post office) to declare such income and pay tax, surcharge and penalty totaling in all to 49.9 per cent of such declared income.

Besides, the scheme provides that a mandatory deposit of not less than 25 per cent of such income shall be made in the zero-interest bearing Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years.

It commenced on December 17 and shall remain open for declarations and deposits up to March 31, 2017.

The Central Board of Direct Taxes said the declaration should be accompanied by proof of tax payment and deposit made, adding that taxes paid under the scheme will not be refundable under any circumstances.

“A declarant under this scheme shall not be entitled in respect of undisclosed income or any amount of tax and surcharge paid thereon, to re—open any assessment or reassessment made under the Income Tax Act or the Wealth tax Act 1957, or to claim any set—off or relief in any appeal,” it said.

The person making a declaration under the scheme will be liable to pay tax at the rate of 30 per cent of the undisclosed income as increased by surcharge to be called the Pradhan Mantri Garib Kalyan Cess calculated at 33 per cent of the tax. In addition, penalty at the rate of 10 per cent of the undisclosed income will be payable.

CBDT said the declaration under the scheme may be made in respect of any income in the form of cash or deposit in an account maintained by the person with a specified entity, chargeable to tax under the Income—Tax Act for any assessment year commencing on or before April 1, 2017.

No deduction in respect of any expenditure or allowance or set—off of any loss will be allowed against the income in respect of which a valid declaration is made under the scheme.

“A declaration under the scheme can be made anytime on or after December 17, 2016, but on or before March 31, 2017. The tax, surcharge and penalty payable under the scheme and deposit to be made... shall be paid/made before filing of the declaration,” it said.

The declaration to the Principal Commissioner or the Commissioner of Income Tax can be done electronically under digital signature or in print. The tax authorities will issue a certificate to the declarant within 30 days from the end of the month in which a valid declaration has been furnished.

Not declaring the blackmoney under the scheme now but showing it as income in the tax return form would lead to a total levy of 77.25 per cent in taxes and penalty. In case the disclosure is not made either using the scheme or in return, a further 10 per cent penalty on tax will be levied followed by prosecution.

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