Tax compliance scheme: Which assets you cannot declare
No declaration of foreign assets can be made which have been acquired during the year for which a notice under specified sections of the I-T Act has been issued
The government has recently come up with a new legislation namely Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, effective from July 1, 2015, to track undisclosed income and assets. The intention is to deal with the problem of undisclosed foreign income and assets and to provide for imposition of tax on such undisclosed foreign income and assets.
Provisions of the Act
The provisions of the Act are very stringent, providing for harsh penalties including prosecution. The Act seeks to levy tax at the rate of 30% of the value of undisclosed foreign income and assets and penalty equivalent to three times of the tax amount and also provides for prosecution up to 10 years.
The government has also notified a tax compliance scheme wherein one time opportunity has been given to declare the undisclosed foreign assets. This scheme is meant to provide an opportunity to persons to declare undisclosed foreign assets before the stringent provisions of the Act apply.
It is meant to provide a last opportunity to persons with undisclosed income and assets abroad before the stringent provisions (of the new law) apply. Under the scheme, declaration of assets can be made till September 30, 2015 in the form specified, and tax @ 30% along with the penalty @ 30% on such declared assets need to be paid till December 31, 2015.
Circular on one-time compliance facility
The government has issued a circular on July 6, 2015 wherein clarifications have been provided on various queries received in respect of one time compliance opportunity. The circular has clarified that the one- time compliance facility is not available for persons against whom any information has been received from foreign nations on or before June 30, 2015 and has also mentioned other circumstances under which declaration of assets can’t be made.
No declaration of foreign assets can be made which have been acquired during the year for which a notice under specified sections of the Income Tax Act has been issued and the proceedings are pending before the assessing officer. Also, the declarant will not be eligible for declaration under Chapter VI of the Act where an undisclosed asset has been acquired during any tax year for which notice under specified sections of the Income-tax Act has been issued and served on the declarant on or before June 30, 2015 even though the proceedings have not commenced.
However, assets acquired in tax year in respect of which notice under specified sections of the I-T Act has been issued can be declared provided notice has been issued on or after June 30, 2015. Assets acquired in the tax year for which search has been initiated and time for issuance of notice has not expired can also not be declared. Similarly, in cases where survey has been conducted, declaration can’t be made in respect of an undisclosed asset acquired in the year of survey.
The benefit of declaring assets is also not available for those assets in respect of which the central government has received information under the DTAA and Tax Information and Exchange Agreements (TIEA) with foreign countries and jurisdictions. As per reports, Indian government has received information regarding some of its citizens having undisclosed foreign accounts.
Assets acquired from money earned through corruption can also not be declared under this scheme. This one- time opportunity should be availed to declare the undisclosed foreign assets carefully in order to avoid the harsh implications as explained above.
