The Curious Case of Black Money Stashed Abroad

BLACK MONEY(UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015 have been notified on 26^th May 2015 and Rules there under have been notified on 2^nd July 2015. It is an approach towards the promise made by Prime Minister Narendra Modi , ensuring the black money stashed abroad would be brought back to the country.

It is an one time compliance opportunity given for a limited period to people who have any foreign assets which have hitherto not been disclosed to evade the Income Tax. This could rather be a warm welcome. However the real question lies with its magnitude of response. Will it take a grand opening or open to a lukewarm response?

Setting eyes into the notification dated 3^rd July 2015, which says, "The designated Commissioner of Income Tax will inform in respect of declaration filed upto the prescribed date, i.e., 30^th September 2015  to the declarant by 31.10.2015 whether the competent authority already has any information in respect of the asset(s) declared. The declarant may revise his declaration within 15 days of receipt of the intimation from the Commissioner of Income Tax."

In a personal view, if the Government needs to achieve success in its quest then they should formulate a simple strategy which allows the declarant to form a concrete opinion and move optimistically ahead. If a declarant is entitled to the scheme, with his total liability of 60% (which includes Tax of 30% and Penalty of 30%) with the cost or fair market value of the asset, whichever is higher. However, as per aforesaid notification after filing the declaration, the declarant receives a communication from the designated commissioner that the competent authority already have the information in respect to the assets declared. This can lead to the declarant subjected to harsh penalties, fine and even rigorous imprisonment for those assets.

This is extremely detrimental to voluntary comply which is expected. The declarants should be well aware about the extreme consequences before making the declaration so that they can take a firm decision for buying the peace of mind and being a tax compliant. Government should have issued a proper guidance that cases where proceeding  has already been initiated against the assessee will not be covered under the scheme and  in all other cases, the declarant will be having a maximum liability of 60%.