In India, Black money refers to funds earned on the black market, on which income and other taxes have not been paid. The total amount of black money deposited in foreign banks by Indians is unknown.
Some reports claim a total exceeding US$12.4 trillion are stashed in Switzerland. Other reports, including those reported by Swiss Bankers Association and the Government of Switzerland, claim that these reports are false and fabricated, and the total amount held in all Swiss banks by citizens of India is about US$2 billion.
My Earlier article regarding this issue was Ways to Convert Black Money to White, which was basically to throw light on the wrong means adopted by people and it was not meant to encourage taxpayers to follow such methods but which was misunderstood by many. I trust that a tax planning should be done in such a way that it can stand the test of legal battle of course subject to debates.
It is well known that bringing back black money has hit a road block and with Finance minister Arun Jaitley giving excuses of double taxation avoidance agreements (DTAA). It has done more harm than good to BJP.
Recently in a step towards delivering on the BJPs poll promise of unearthing black money stashed abroad, government has introduced the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, in the parliament.
The black money bill was passed by the Rajya Sabha on Wednesday. The Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015, it seeks to check the black money menace with stringent provisions for those stashing illegal wealth abroad.
The Bill provides for separate taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the new legislation.
Salient Features of the bill:
1) Tax on all foreign income will have to be paid at the flat rate of 30% without any exemption, deduction, set off or carry forward losses that Income tax permits.
2) Enhanced punishment of jail for 3-10 years for willful evasion of tax on foreign income along with a penalty equal to 3 times the amount of tax evaded or 90% of the undisclosed income or the value of the asset.
3) Failure to file returns of foreign income or assets will attract a penalty of Rs. 10 lakh.
4) Second and subsequent offence will be punishable with rigrous imprisonment of 3-10 years with fine upto Rs. 1 crore.
5) Undisclosed holdings of less than 5 lakh at any time during a year not reported out of oversight or ignorance will not entail penalty or prosecution.
6) The bill empowers the centre into agreements with other countries for the exchange of information, recovery of tax and avoidance of double taxation.
7) To include tax evasion under the proposed legislation as scheduled offence the bill propose to amend the prevention of Money laundering Act, 2002.
8) The right to appeal will be to the Income tax appellate Tribunal and to the Jurisdictional High Courts and Supreme Court on Substantial Question of law.
9) The tax authorities will have power of discovery and Inspection, issue of Summonses, enforcement of attendance, Production of evidence and impounding of account books and documents.
10) There will also be a penalty of 300 per cent of taxes on the concealed income and assets.
Finance Minister Arun Jaitley said that the bill, when made an Act, will provide the last window for those stashing black money in foreign banks to come out clean. In case they dont, the government will come down heavily upon them, he said.
The window provided in the Bill is not an amnesty scheme, Jaitley said. He said the defaulters will have to pay 30 per cent tax and 30 per cent penalty. However, those who do not declare their wealth in the window period will be liable to pay 30 per cent tax and 90 per cent penalty and could also face imprisonment for a minimum of three years which could go up to 10 years.
The Finance Minister added that 2017 onwards, India will be getting real-time information about expenditure by Indian individuals in foreign countries as part of an arrangement with G-20 countries.