Budget 2024: Amendments to Penalties for Undisclosed Foreign Income and Assets in ITR
The Black Money Act, 2015, is set for amendments effective October 1, 2024, which increase the exemption threshold for penalties related to undisclosed foreign income and assets. Sections 42 and 43, imposing a ₹10 lakh penalty for failure to report foreign assets or inaccuracies, will now exempt assets valued up to ₹20 lakh (excluding immovable property) from these penalties. This change aims to alleviate the burden of penalties on lower-value foreign assets.
Budget 2024: Amendments in section 42 and 43 of the Black Money Act, 2015 relating to penalty for failure to disclose foreign income and asset in the ITR
Section 42 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the Black Money Act) provides for penalty for failure to furnish details of foreign income and assets in the return of income. The said section is applicable in respect of an assessee being a resident other than not ordinarily resident in India who has failed to furnish the return of income when such assessee is having any asset, or is a beneficiary of an asset located outside India or is having any income from a source located outside India. Similarly, section 43 of the Black Money Act provides for penalty for failure to furnish in return of income, an information or furnish inaccurate particulars about an asset (including financial interest in any entity) located outside India. The said section is applicable when the assessee being a resident other than not ordinarily resident in India has failed to furnish the details of any asset located outside India, held by him as a beneficial owner or otherwise, or in respect of which he was a beneficiary, or relating to any income from a source located outside India.
2. In view of the above, every resident and ordinarily resident, while filing the return of income, shall disclose all foreign assets (including investment in shares and securities) and income from such foreign assets in the Income Tax Return. Failure to furnish the ITR in relation to foreign income and asset or to report such foreign income and assets located outside India in the ITR may attract a penalty under section 42 or 43 of the Black Money Act, of an amount of ten lakh rupees regardless of the value of asset located outside India.
3. Further, provisos to the aforementioned sections of the Black Money Act state that the provisions of these sections shall not apply in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year. Suggestions have been received from various stakeholders that the threshold limit of five lakh rupees is very low which results in many penalties where the asset value itself is less than the penalty amount.
4. It is proposed to amend the provisos to sections 42 and 43 of the Black Money Act to provide that the provisions of the said sections shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees.
5. This amendment will take effect from the 1st day of October, 2024.
[Clause 156]
Extract of Clause 156 of Finance Bill 2024
Clause 156 of the Bill seeks to amend the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
Section 42 of the said Act relating to penalty for failure to furnish return in relation to foreign income and asset. The said Act provides that an assessee being a resident and ordinarily resident who has failed to furnish the return of income when such assessee has held foreign assets as specified. Failure to furnish the return in relation to foreign income and asset, may attract a penalty of an amount of ten lakh rupees. Proviso to the said section makes an exemption in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year.
It is proposed to substitute the proviso to the said section to provide that the provisions of the said section shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees.
Section 43 of the said Act relating to penalty for failure to furnish in return of income, an information or furnish inaccurate particulars about an asset (including financial interest in any entity) located outside India. The said section provides for a penalty of ten lakh rupees regardless of the value of asset located outside India when the assessee being a resident and ordinarily resident fails to furnish the details of any specified foreign assets or furnishes inaccurate particulars of such assets in the return of income filed by him. Proviso to the said section makes an exemption in respect of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year.
It is proposed to substitute the said proviso to provide that the provisions of the said section shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees.
These amendments will take effect from 1st October, 2024.
