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BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) and IMPOSITION OF TAX ACT, 2015
28 Jul 2015

                                       “Undisclosed Foreign Income and Assets”

Introduction:-

“Undisclosed foreign income and assets” has been defined under the BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) and IMPOSITION OF TAX ACT, 2015. As per the subsection 12 of section 2 of the Act “Undisclosed foreign income and assets”means the total amount of undisclosed income and the value of an undisclosed assets which is located outside the territorial limit of India.

In India or elsewhere, Black Money (undisclosed foreign income and assets) is one of the biggest hurdle for economic development of any country. Therefore to mitigate this problem government of India has enacted a new legislation named “BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) and IMPOSITION OF TAX ACT,2015” which was passed by the parliament of India and received the assent of the president of India on the 26th day of May 2015. This Act has come into effect from 01st, July 2015.

Chapter VI of the Act comprising section 59 to section 72, requires the legal compliance relating to the undisclosed foreign income and assets and guide lines for the filing declarations regarding undisclosed foreign income and assets.

Legal Compliance:-

A declaration under chapter VI of the Act can be made in respect of undisclosed foreign income and assets by a person who is a resident other than not ordinary resident in India as per sub clause 6 of section 6 of the Income tax Act. A declaration may be made in respect of any undisclosed assets located outside India and acquired from income chargeable to tax under Income tax in India for any assessment year prior to A.Y. 2016-2017 for which he/she had either failed to furnish return under section 139 of Income tax Act or failed to disclose the Income in return furnished before the commencement of this Act or such income escaped assessment by reason of the omission or failure on the part of that related person to make a return under the Income tax Act or failure to disclose any other important fact related to the assessment.

i)                   Time limit for filing Declaration: -A person can make declaration before the designated Principle Commissioner or Commissioner of Income tax (PCIT/CIT) on or before 30th day of September 2015. Declaration shall be made in FORM 6. This Form is now available for filing ONLINE on the Income Tax Portal also.

After furnishing the declaration to the designated PCIT/CIT, PCIT/CIT will issue an intimation in the performa annexed to the circular to the declarant by 31st day of October 2015 whether any information in respect of the declared assets had been received by the competent authority on or before 30th day of June 2015, under an agreement entered into by Central Government u/s 90 or 90 A of the Income Tax where any such declared information received, the declarant shall file a revised declaration in Form 6 excluding such asset and such revised declaration shall be filed within 15 days of receipt of intimation from the designated PCIT/CIT.

 

 

ii)                 No declaration is acceptable from persons already indicted or proceedings are in process, in certain cases:-

*By 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 XVII of the Indian Penal code, the Narcotic Drugs and Psychotropic substance Act, 1985 the unlawful activities (Prevention) Act, 1967 the prevention of corruption Act, 1988.

*To any person notified under section 3 of the special court (Trial of offences relating to transaction in securities) Act, 1992.

*In relation to any undisclosed assets located outside India which has been acquired from income chargeable tot tax under the Income Tax Act for any Previous year relevant to assessment year prior to the beginning on the 1st April 2016.

 

Note:- For detailed information kindly refer to the section 71 of the Black Money(Undisclosed Foreign Income And Assets) and Imposition Of Tax Act, 2015.

 

iii)               Declaration  shall be invalid in certain cases: - Given as follows:

*If the declarant fails to pay the entire amount of tax and penalty within the specified date, i.e., 31.12.2015;

*Where the declaration has been made by misrepresentation or suppression of facts or information.

Signing of Declaration:-

As per sub section 2 of section 62 of the Act explained below mention guidelines regarding the sign authorization:

Sl. No.

Declarant’s Status

Declaration to be signed by:-

(i)

Individual

Individual, if absent from India Person authorized by him.

If mentally incapacitated, his guardian or other person competent to act on his behalf;

(ii)

Company

Managing Director, where for any unavoidable reason the managing director is not able to sign or there is no managing director, by any Director;

(iii)

Firm

Managing Partner, where for any unavoidable reason the managing partner is not able to sign or there is no managing partner, by any partner except minor partner;

(iv)

H.U.F.

Karta, where the Karta is absent from India or is mentally incapacitated form attending to his affairs, by any other adult member of the HUF;

(v)

Any other Association

Any member of the association or the principle officer;

(vi)

Any other Person

That person or by some other person competent to act on his behalf;

  

 

Rate of Tax & Penalty: -

As per the Section 60 and 61 of the Act, The person making aforesaid declaration under the provision of this chapter would be liable to pay tax at the rate of 30 % of the value such undisclosed assets. In addition, person would also be liable to pay penalty at the rate of 100% of such tax therefore the declarant would be liable to pay total 60% of the value of the undisclosed assets. The last date for payment of the tax plus penalty (60%) is on or before 31st December 2015. After the intimation of payment by the declarant, the designated PCIT/CIT will issue an acknowledgment in FORM-7 of the accepted declaration within 15 days of such intimation of payment made by the Declarant.

However it should be noted that in case of revision of such declaration the time period for payment of Tax and penalty will be same i.e. 31st December 2015.           

Immunities for the Declarant:-

·        Undisclosed foreign assets declared not to be included in total income of the declarant as per the Income Tax Act 1961. (section 64)

·        Declaration not admissible in evidence against declarant for the purpose of any proceeding relating to imposition of penalty for the purpose of prosecution under the Income Tax Actor the Wealth Tax Act or the Foreign exchange management Act or the Companies Act or the Custom Act. (Other than penalty refer to section 61 of the Black Money (undisclosed foreign income and assets) and imposition of tax act 2015).

·        The value of assets declared in the declaration shall not be chargeable to Wealth Tax for any assessment years or years.

Special Relief for small time Foreign Bank account holders:

Under Section 43 if these assets are fully explained in their previous Tax Returns or can be explained now, they are not treated as undisclosed foreign assets and should not be declared under Chapter VI of the Act. However, if these assets are not reported in Schedule FA of the Income-tax Return for assessment year 2016-17 (relating to previous year 2015-16) or any subsequent assessment year by a person, being a resident (other than not ordinarily resident), then he shall be liable for penalty of Rs. 10 lakhs under section 43 of the Act. The penalty is, however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs. 5 lakhs at any time during the previous year.

 

Detailed Questions & Answers have been issued by the Ministry of Finance, Government of India vide Circular No. 13 of 2015 dated 06th, July 2015. Here you will find most of the replies with due illustrations. Please see the same on the website of Income Tax  Department..

 

 

 

 

Conclusion:-

We can conclude that Chapter VI of the Act, section 59 to section 72, provides a one-time compliance opportunity for a limited period to any person who wish to ward of stiff penalties and prosecutions by disclosing his foreign assets and income for the purpose of Income tax through “ Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015”.

 

For removing any doubt and to seek any further clarifications please contact Mr. Hemant Paliwal, Practicing Company Secretary at:  hemant@hpacs.com

 

Rishi Vashisth

HPACS Team