CA Paras Mehra
After banning the 500/1000 currency notes, there were panic all around the country. Everybody was running for solution but no one finding it so. Government was keeping a close eye on every activity of the people. Further, people were finding the illegal ways to convert their black money.
Hence, Instead of allowing people to find the illegal ways of converting their black money into black again, government came up with another opportunity for the people to come out clean. The amendment is proposed, but there are chances that it will be passed in the due course.
Hence, looking at its urgency, we have outlined some of the points to know everything about the new scheme.
Here are the outlined points;
1. This scheme may be called PRADHAN MANTRI GARIB KALYAN YOJANA, 2016 and it shall be applicable once government notifies it.
2. To avail this scheme, person needs to give declaration under newly inserted chapter IXA. Any person can avail this scheme by making a declaration of any income, in the form of cash or deposit in an account maintained by the person with:
- Any banking company including schedule commercial bank etc.
- Reserve Bank of India (RBI)
- The head post office or the sub post office.
However, the following person shall not be allowed to avail the benefit of the scheme:
– 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
– In relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002;
– To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992;
– In relation to any undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
3. The tax on the undisclosed income shall be 49.9%. There is no limit on the size of the deposits.
4. Apart from the tax paid @ 49.9%, a person making declarations shall have to deposit the sum @ 25% of the undisclosed income for four years. This deposit shall also not carry any interest.
5. Payment of taxes as stated above shall be made before filing the declaration. The challan of payment shall be submitted along with the declaration.
6. After filing the declaration in consonance with the rules prescribed, the person shall also be immune from the prosecutions.
The Stringent penalty
Income tax act has been further amended to dissolve any dispute that may arise while taxing the black income. The amendment has been made in section 115BBE and the tax rates (surcharge). Here is the glimpse of changes made;
− Tax rate under section 115BBE has been increased to 60%.
− Surcharge on any incomes taxed under section 155BBE will be 25%.
Apart from above changes, section 271AAC has also been inserted to impose penalty of 10% of the tax amount.
In net, the following tax rate shall be applicable if caught by the government;
| PARTICULARS | TAX RATE |
| Tax rate under section 115BBE | 60% |
| Surchage @25% of the tax rate above | 15% |
| Penalty under section 271AAC @10% | 6% |
| Education cess 3% of the tax rate | 1.8 |
| GRAND TOTAL | 82.8% |
CASE WHERE DECLARATION SCHEME NOT AVAILED BUT ITR FILED AND TAX PAID VOLUNTARY UNDER SECTION 115BBE
If a person does not want to choose disclosure scheme but pay the tax voluntarily u/s 115BBE and disclose all the income in his ITR, then penalty under section 271AAC shall not be applicable and the tax to be paid will be as follows;
| PARTICULARS | TAX RATE |
| Tax rate under section 115BBE | 60% |
| Surchage @25% of the tax rate above | 15% |
| Penalty under section 271AAC @10% | NA |
| Education cess 3% of the tax rate | 1.8 |
| GRAND TOTAL | 76.8% |
Conclusion
It is a welcomed step but only time will tell when this will be passed and notified so that it may have practical implementation.
About the Author
CA Paras Mehra is an advisor and consultant of Income tax act, 1961 and the GST law. He loves to read and write and also to take lectures on his subject matters. He is also professionally associated with hubco.in. You can connect to author at paras.mehra18@gmail.com.
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what about the small deposits of / upto Rs 250000?, if included in ITR under the normal provisions. Will they also come under the provisions of Sec 115BBE as ammended, in the absence of any threshold limit. Or Pm’s assurance shall be sufficient ?
Will this scheme be applicable to persons depositing total less than or equal to 2.5 lakhs and what declarations are to be given.?
This is a new PPP. Politicians Protecting Politicians. They are the ones with maximum black money plus black wealth. Birds of the same flock!
They are not getting away just like that. Tax of 50%. and on rest of 50%, they have to keep it as a deposit of 25% of the remaining for four years and interestingly there is no interest for that. Hence Government can gain lot by using such funds in the development activities.
I suggest the following…:
a) taking a bribery should be legalised.
b) the bribery income should be declared and a separate rate of tax to be levied
c) alternatively, the bribery and undisclosed income should be deposited to Government account and the same can be with drawn after 8 years which will bear no interest and no tax.
Amendment in Section 115BBE is unconstitutional and against law because rates of tax could not be changed retrospectively but should be prospectively. Even Parliment could not pass such Bill with retrospective effect. It should be challanged in all High Courts of India to show solidarity and unity against autocratic act of Union Government
Sir, does this scheme apply to Govt Servants ?
If Yes .. it means they are going to get away with paying 50% on their corrupt money.
What next ?
Good article