The Undisclosed

Foreign Income
and Assets
(Imposition of
Tax) Bill, 2015
Anti-Black Money Bill

Applicability and Object

Applicability
The Black Money Bill (Bill) shall be
applicable from 01-04-2016
Objectives of the Bill
To tax undisclosed foreign income and
assets acquired from such
undisclosed foreign income;
To punish the persons indulging in
illegitimate means of generating
money causing loss to the revenue;
To prevent illegitimate income and assets
kept outside India from being
utilized in ways which are detrimental to
Indias social, economic and
strategic interests and its national security

Charge and Rate of tax

Undisclosed

foreign income of the previous

year is taxable at flat rate of
30%
FMV of undisclosed foreign asset shall be
taxable in year in which it
comes to notice of Assessing Officer
Note: Nothing is mentioned in this Bill or the
Finance Bill, 2015 about the
levy of surcharge and Education cess on the
tax computed at the rate of
30% on undisclosed foreign income or
asset.

Salient Features of the Bill

Regular

tax, interest, penalty, prosecution

regime for undisclosed foreign
income and assets of an ordinarily resident
No 16 year time-limit to tax foreign
income/assets escaping assessment
Flat 30% tax on total undisclosed foreign
income and asset (no surcharge or
education cess)
No wealth tax and no interest under
Section 234A, 234B or 234C
Penalty up to 3 times of tax computed
One-time limited window compliance
scheme Levy of tax, lower penalty of
up to 100% of tax computed and no
prosecution

What shall be subject to

tax?
Undisclosed foreign income or asset shall
be:
Foreign income which is not disclosed in
return of income (original,
revised or belated);
Foreign income in respect of which
return of income is not furnished;
and
Undisclosed foreign asset

In case of an individual or HUF who are

resident and ordinarily resident
shall be liable to pay tax (Assessee)
Meaning

of resident and ordinarily

resident shall be as per provisions
of Section 6 of the Income-tax Act (I-T Act)
Assessee

shall include every person who is

deemed to be an assessee-indefault
under I-T Act

They are income declaration schemes, not amnesty schemes with 50% to 100%
discount on the tax liability of the dishonest. They do carry reasonable discounts on
interest and penalty, but taxes are payable at more than normal rates. An opportunity is
given to taxpayers to escape prosecution, and they create a win-win situation for both
them and the government but the dishonest are not rewarded for their dishonesty.
Under the Black Money (Undisclosed Foreign Income & Assets) and Imposition of
Tax Act, 2015, 644 declarations of undisclosed foreign income and assets were
received, and just Rs 2,428 crore was collected in taxes. Ninety per cent of the
collection came from 5% of declarations. This scheme was not as successful as
expected the reason was that no discount was given on the original tax rate, but the
tax rate was 60% instead of the normal 30%. The other reason for fewer declarations
could have been that the scheme was not available for illegal money parked abroad.
Perhaps celebrities or persons of repute stayed away for fear of their reputation,
should their names emerge through a PIL in a court of law. But in my view, this
scheme was successful compared to the 1991 scheme because the tax rate was
60%, i.e., double the normal tax payable, compared to the zero rate payable under the
earlier scheme.

The Income Declaration Scheme of 2016 is also just that. The tax payable is 45%, i.e.,
15% more than the normal tax rate of 30%. This includes a penalty of 7.5% and
surcharge of 7.5%. Opportunity is given at a little extra cost to avoid further interest,
penalty or prosecution under the Income Tax Act, 1961, and the Benami Transaction
(Prohibition) Act, 1988. This scheme may bring smaller declarations, considering the
tax rate of 45%, and the fact that the fair market value of declared assets shall be taken
as on June 1, 2016. There is no room to manipulate and pay less tax like in VDIS,
1997.
The other scheme is Direct Tax Dispute Resolution Scheme, 2016. The tax payable is
the whole of the disputed tax in cases where the disputed tax amount does not exceed
Rs 10 lakh, and interest up to the date of assessment. In other cases, it is the whole of
the disputed tax, plus 25% of minimum penalty leviable and interest on the disputed
tax until the date of assessment. In cases of pending appeals against penalty, 25% of
minimum penalties applicable are payable.
The scheme is available only for appeals pending with the Commissioner of Income
Tax, and the purpose of the scheme is to reduce the pending litigation with the
appellate authority. The benefit under this scheme is to pay 25% of the minimum
penalty only up to the date of assessment and not up to the date on which the appeal is
decided and given effect. There is no reprieve for honest taxpayers in this scheme.
Those against whom wrong assessment orders have been passed must continue with
litigation.
Given this background, and the fact that the present schemes, while refusing to reward
the dishonest, extend an opportunity to come clean by paying more than the normal
tax, cannot be seen as being unsuccessful, even if fewer declarations are received.
No big discount is given on taxes payable, and there is no room for manipulation.

Penalty for offences:

o

Undisclosed foreign income/assets: The penalty for nondisclosure of foreign income or assets
would be equal to three times the amount of tax payable, in addition to tax payable at 30%.

Failure to furnish returns: The penalty for not furnishing income tax returns in relation to
foreign income or assets is a fine of Rs 10 lakh. This would not apply to an asset, with a value of five
lakh rupees or less.

Undisclosed or inaccurate details of foreign assets: If a person who has filed tax returns
does not disclose his foreign income, or submits inaccurate details of the same, he has to pay a fine
of Rs 10 lakh. This would not apply to an asset, with a value of five lakh rupees or less.

Second time defaulter: Any person, who continues to default in paying tax that is due, would be
liable to pay an amount equal to the amount of tax arrears.

Other defaults: If a person fails to abide by the tax authority in (i) answering questions, (ii)
signing off on a statement, (iii) attending or producing relevant documents, he is to pay a fine
between Rs 50,000 to two lakh rupees.

Prosecution for certain offences:

o

Wilful attempt to evade tax: The punishment would be rigorous imprisonment from three to 10
years, and a fine.

Wilful attempt to evade payment of tax: The punishment would be rigorous imprisonment
from three months to three years, and a fine.

Failure to furnish returns: or non disclosure of foreign assets in returns: The punishment is
rigorous imprisonment of six months to seven years, and fine.

Punishment for abetment: The punishment is rigorous imprisonment of six months to seven
years, and fine.

Liability of company: For any offence under this Act, every person responsible to the company is
to be liable for punishment. His liability is absolved if he proves that the offence was committed
without his knowledge.

Agreement with foreign

countries
The Central Government may enter into an
agreement with the
Government of any other country or
specified territory:
to avoid double taxation;
for exchange of information for
prevention of evasion or avoidance of
tax on undisclosed foreign income;
for investigation of cases of evasion or
avoidance of tax on
undisclosed foreign income;
for recovery of tax; or
for carrying out any other purpose of the
proposed legislation