Govt sets 30 September deadline for tax evaders to declare assets

New Delhi: Tax evaders have until 30 September to declare their undisclosed assets and income and a further three months to pay taxes and penalty on these to avoid prosecution under a stringent new law to curb black money.

The government on Wednesday opened the so-called black money compliance window for people with unaccounted and untaxed assets and income.

This will be the last opportunity for tax evaders to come clean before the government starts prosecuting them under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 that prescribes jail terms of up to 10 years and penalties of up to 120% of the value of the undisclosed assets.

If those with undisclosed income and assets stashed overseas declare it within the compliance window, they will have to pay a tax of 30% and penalty of 30% and will be spared prosecution.

The black money act was enacted in May as part of the National Democratic Alliance government’s twin-pronged strategy to tackle black money stashed away both overseas and within India by Indians.

The government has also introduced the Benami Transactions (Prohibition) (Amendment) bill, 2015 in the Lok Sabha to tackle domestic black money.

Through the black money act, the government hopes to overcome the constraints it faces in pursuing evaders because of some clauses under the double tax avoidance and information exchange agreements that India has with other countries.

“The Central Government has notified the 30th day of September, 2015, as the date on or before which a person may make a declaration in respect of an undisclosed asset located outside India under the compliance provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The last date by which a person must pay the tax and penalty in respect of the undisclosed foreign assets so declared shall be the 31st day of December, 2015,” the finance ministry said in a statement.

The government will notify the detailed features of the window separately, it added.

The government is expecting the compliance window to attract enough tax evaders, given that this will be the last opportunity for them to come clean.

From 2017, as per the global automatic exchange of information agreement, India will start getting all financial information about its residents from other countries automatically.

If at that point of time, the tax department comes across cases of tax evasion, all the evaders will be prosecuted under the stringent provisions of the act with the tax and penalty completely wiping off the value of the asset.

“The response to the window depends on what the government says in the rules and the disclosures they would require. For instance, people may not want to disclose the source of their income fearing that it will come to haunt them later,” said Rahul Garg, leader of direct tax practice at consulting firm PricewaterhouseCoopers.

“Many of those who want to come clean in the window may not mind paying the 60% tax but will be worried about the level of confidentiality that will be maintained and if their identities will be protected,” he said.

The new black money law comes with many stringent provisions for individuals as well as banks and financial institutions that abet tax evasion.

Non-filing of returns or filing of returns with inadequate disclosure of foreign assets will be prosecutable, 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. Executives at banks and financial institutions who abet concealment will also be liable for imprisonment of up to seven years.

In addition, the act amends the Prevention of Money Laundering Act (PMLA), 2002 and the Foreign Exchange Management Act, 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 has been 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 has also been amended to enable attachment and confiscation of equivalent assets in India when the asset located abroad cannot be forfeited.

“It is early days to judge the response and effectiveness of the window provided. There is greater likelihood that the facility will be availed only by those who retained monies abroad from the limited perspective of tax avoidance,” said Gokul Chaudhri, leader, direct tax, at BMR and Associates Llp, a consultancy firm.