1. Applicable for undisclosed income in the form of Cash or deposits (including FD/RD,etc) held in in bank accounts or in Post Office (Section 199C) or any other sepecified entity.
2. Pay Income Tax @ 30% of Cash + Surcharge @ 33% of Tax + Penalty @ 10% of Cash i.e. aggregating to 49.90% of undisclosed income (cash) (Section 199D & 199E)
3. The declarant shall ‘deposit’ minimum 25% of Cash in a Deposit Scheme to be notified by the CG in consultation with RBI. (Section 199F)
4. The ‘deposit’ shall be interest free and shall have a lock-in period of 4 years from the date of deposit [Section 199F(2)]
5. Income Tax + Surcharge + Penalty + Deposit i.e. 74.90% has to be paid to the treasury before making the declaration and the proof of payment is to be attached with declaration.(Section 199H)
6. The amount of undisclosed income (cash) shall not be included in the total income of any assessment year of the declarant. (Section 199I)
7. The undisclosed income may have been earned at any time before 01-04-2017. (The provision inadvertently says on or before 01-04-2017, which should be rectified)
8. The declaration made under the scheme shall not be admissible in evidence against the declarant for the purpose of any proceedings under any act except those mentioned in Section 199O (like 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, etc.)
9. The benefit of scheme won’t be available to politicians, government employees (any public servant), drug mafias, benamidars, terror funds, etc.
10. If a declaration has been made by misrepresentation or suppression of facts or without payment of 74.90% of cash as per scheme, such declaration shall be void and shall be deemed never to have been made under this Scheme. What constitutes misrepresentation or suppression needs clarification from the government.
11. If a person fails to make declaration as per above scheme, but file IT Return for AY 2017-18 (i.e. for Financial Year 2016-17) declaring any unexplained income/investment, cash credit, etc. under section 68, 69, 69A, 69B, 69Cor 69D (say unexplained income) he shall be liable to pay income tax @60% of such unexplained income + Surcharge @ 25% of tax + Ed. Cess @ 3% of tax i.e. aggregating to 77.25%.
12. Additionally, if an assessee fails to pay tax as referred in point 11 on or before 31-03-2017 or fails to self declare such unexplained income in return but is determined by AO during assessment, then additional Penalty u/s 271AAC @ 10% of tax payable shall be leviable.
13. Higher Tax in Search Case – If any person admits of any unexplained income during a search (raid) conducted under section 132, substantiates the source of income and within a specified date, pays tax with interest and file return including such unexplained income, THEN he shall be liable to pay penalty u/s 271AAB @30% of unexplained income admitted in addition to Income tax + Surcharge + Ed. Cess as per point 11 i.e. 77.25% + 30% = 107.25%
14. In Search Case not covered by point 13, the penalty shall be higher @ 60% instead of 30%, so the total tax incidence is 137.25%!!!
15. If a person don’t make a declaration under the proposed scheme, then besides higher tax, interest, surcharge and penalty, he may be prosecuted under the regular provisions and/or under the revised Benami Property Transactions Act, 1988
The following provisions of the Benami Property Transactions Act, 1988 as amended recently may be invoked if assessee is unable to prove source of cash deposited and that money deposited belongs to him:
(i) The definition of property in the Benami Act in section 2(26) is very wide and covers all kinds of assets and also specifically includes proceeds from the property.
(ii) The definition of ‘benami transaction’ in section 2(9) covers “a transaction or arrangement in respect of property where the person providing the consideration is not traceable or fictitious”
(iii) Section 53(1) of the Act makes it a punishable offence if benami transaction is entered into in order to defeat the provisions of any law. Whosoever is found guilty of the offence of benami transaction as above shall be punishable for rigorous imprisonment of up to 7 years and fine up to 25% of fair market value of the property.
(iv) Section 5 of the Act empower Central Government to confiscate the benami property.
Advice: It is strongly advised to each and every person having black money generated from legal activities to avail this last opportunity to come clean by paying taxes under the new proposed scheme. And they should not even think of declaring any black money generated from illegal activities, corruption, terrorism, extortion, etc belonging to others as besides confiscation and fine of 25%, the false declarant (benamidar) may land up in jail for rigorous imprisonment of upto 7 years!!!