The National Democratic Alliance (NDA) government on Friday tabled a bill in the Lok Sabha to tackle black money—unaccounted money on which no tax has been paid—stashed in overseas banks by Indians as it steps up efforts to bring tax evaders to book.

The Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015, proposes up to 10 years of jail for concealing foreign assets and income, and evasion of tax on these.

Banks and financial institutions that abet concealment will also be liable for punishment of up to seven years, as the government seeks powers to bring such errant financial institutions to task. It also proposed a stringent penalty to be imposed on tax evaders.

“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% of the undisclosed income or the value of the undisclosed asset. This is in addition to tax payable at 30%," said a statement from the income tax department.

The government hopes these steps will help in countering the constraints faced by it given the secrecy clauses in various information exchange and double taxation avoidance agreements that India has with other countries. India has been in talks with Switzerland unsuccessfully for the past few years to get information on bank accounts held in Swiss banks by Indians.

As per the new bill, non-filing of returns or filing of returns with inadequate disclosure of foreign assets will be liable for prosecution, with rigorous imprisonment of up to seven years and will also attract a fine of 10 lakh.

Indians will also have to disclose the date of opening foreign bank accounts.

The government will provide a short compliance window to tax evaders to declare their foreign income and assets without being prosecuted under the stringent provisions of the new law. They can file a declaration before the specified tax authority and pay tax at the rate of 30% and an equal amount by way of penalty.

“It is to be noted that this is not an amnesty scheme as no immunity from penalty is being offered. It is merely an opportunity for persons to come clean and become compliant before the stringent provisions of the new Act come into force," the tax department said. The government will notify the duration of the compliance window after the bill is passed by Parliament.

The government has also included safeguards in the bill to protect persons holding foreign accounts with minor balances, which may not have been reported. Failure to report bank accounts with a maximum balance of up to 5 lakh at any time during the year will not entail penalty or prosecution.

Additionally, tax evaders will be issued notices and given the opportunity of being heard. The right of appeal has been protected by providing for appeals to the Income Tax Appellate Tribunal, the high courts and the Supreme Court.

During his budget speech, finance minister Arun Jaitley announced the government’s intention to bring in a new law to deal with black money stashed abroad, along with strengthening the Benami Transactions (Prohibition) Bill to check domestic black money and enable confiscation of so-called benami property—where a person is a beneficial owner without having his or her name mentioned anywhere.

In addition, the bill proposes to amend the Prevention of Money Laundering Act (PMLA), 2002, and the Foreign Exchange Management Act (Fema), 1999, to make concealment of income a punishable act.

The offence of concealment of income or evasion of tax in relation to a foreign asset will be made a predicate offence—a crime that leads to money laundering—under PMLA, enabling enforcement agencies to attach and confiscate unaccounted assets held abroad and prosecute people laundering black money.

The definition of the proceeds of the crime under PMLA will also be amended to enable attachment and confiscation of equivalent assets in India when the asset located abroad cannot be forfeited.

The proposed legislation will provide a further push to the efforts undertaken so far to identify and seize black money hoarded abroad, said K.V. Karthik, senior director at consulting firm Deloitte.

“With indications that the government is likely to join the multilateral competent authority agreement on automatic exchange of financial account information and implementation of Foreign Account Tax Compliance Act, the efforts to identify funds stashed abroad will receive considerable fillip," he said.

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