Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

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Overview:

The Ministry of Finance recently informed that the Income Tax Department has raised tax demands worth Rs 13,566 crore under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act over the last four years.

About Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:

  • Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, or the Black Money Act (as popularly known), has come into force w.e.f. 01.07.2015.
  • Objective: To create a deterring effect on illegal foreign transactions and bring back undisclosed Indian money abroad.
  • Features of the Act:
    • Applicability:
      • The Act will apply to all person resident in India.
      • It will also apply to a person being Not an ordinary resident or Non-resident but who was an ordinary resident of India during the previous year when undisclosed income was earned or assets acquired outside India.
      • Provisions of the Act will apply to both undisclosed foreign income and assets (including financial interest in any entity).
    • Tax:
      • Undisclosed foreign income or assets shall be taxed at a flat rate of 30 percent.
      • No deductions, exemptions, carry forward, or set-off shall be available while computing tax liability under the BM Act, unlike the Income Tax Act.
    • Penalties:
      • The penalty for non-disclosure of income or an asset located outside India will be equal to three times the amount of tax payable thereon, i.e., 90 percent of the undisclosed income or the value of the undisclosed asset. This is in addition to the tax payable at 30%.
      • There are other penalties also leviable on account of non-disclosure of required information etc., and there are prosecution provisions also within the Act.
    • One-time compliance opportunity:
      • The Act also provides a one-time compliance opportunity for a limited period to persons who have any undisclosed foreign assets which have hitherto not been disclosed for the purposes of Income-tax.
      • Such persons may file a declaration before the specified tax authority within a specified period, followed by payment of tax at the rate of 30 percent and an equal amount by way of penalty.
      • Such persons will not be prosecuted under the stringent provisions of the Act.

 


Q1: What is Black Money?

Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. Black money proceeds are usually received in cash from underground economic activity and, as such, are not taxed.

Source: Tax demands of Rs 13,566 crore raised in four fiscals under black money law: MoS Finance