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Ramesh Pathania/Mint
Ramesh Pathania/Mint

A push to disclose unaccounted money

A 120-day compliance window has been allowed for domestic taxpayers wherein they can declare their undisclosed income or assets

A 120-day compliance window has been allowed for domestic taxpayers wherein they can declare their undisclosed income or assets

The finance minister has proposed a 120-day compliance window for domestic taxpayers to declare undisclosed income or assets. This is a chance to close the old chapter and start afresh by paying tax of 30%, surcharge at 7.5%, and penalty at 7.5%, which totals to 45% of the undisclosed income.

The surcharge levied at 7.5% will be called Krishi Kalyan surcharge, the proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers.

The compliance window will be open from 1 June to 30 September this year, along with an option to pay the amount due within two months of declaration under the Income Disclosure Scheme (IDS).

The finance minister also clarified that there will be no scrutiny or enquiry regarding income declared in these declarations under the Income-tax Act, 1961, or the Wealth Tax Act, 1957, and that these declarants will have immunity from prosecution. There is also immunity from Benami Transaction (Prohibition) Act, 1988, proposed.

“This is a good opportunity to come clean. You can still hold the remaining 55% of income that has not been declared instead of going through stringent scrutiny. Whether people will come forward to declare their undisclosed income depends on how deep the risk is and personal choice," said Neha Malhotra, executive director, Nangia & Co, a chartered accountancy firm.

This is not the first time that the government has introduced such a scheme. “This seems to be similar to what the government had legislated in 1997, as the Voluntary Disclosure of Income Scheme (VDIS). Like VDIS, the IDS discriminates between law abiding and other taxpayers, and like the earlier scheme, its acceptability in attracting higher tax declarations remains circumspect," said Naveen Aggarwal, partner-tax, KPMG in India.

The finance minister, however, clarified that it is not a VDIS. “There are monumental income tax law changes that I have made... It is not a VDIS and it is not an amnesty," Jaitley said in an interview to broadcaster Doordarshan News. Under VDIS there was no penalty or surcharge. The tax was then levied at the highest tax bracket.

Last year the government had provided a 90-day compliance window for those with undeclared foreign assets, which closed on 30 September 2015. During this window, those who had not declared their foreign assets got an opportunity to disclose details and escape the stringent provisions under the black money law. They had to pay a penalty of 30% and a tax of 30%, which totalled to 60% of the undisclosed income. It was the last opportunity for tax evaders to come clean before the government started prosecuting under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which prescribes jail time of up to 10 years and penalties of up to 120% of the value of the undisclosed assets.

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