India has been tapping all available sources of information from its tax treaty partner countries to identify those who have foreign income which is not disclosed. (Pradeep Gaur/Mint)
India has been tapping all available sources of information from its tax treaty partner countries to identify those who have foreign income which is not disclosed. (Pradeep Gaur/Mint)

Stricter rules on dealing with tax evasion kicks in from today

  • The new guidelines state that offences linked to any wrongdoing covered under the Benami Act are not compoundable
  • The tougher approach in dealing with tax evasion comes at a time when direct tax revenue collections is estimated to be below targets

New Delhi: A stricter set of norms that govern the option of paying additional fee to avoid prosecution for income tax offences has kicked in from today.

The new guidelines on compounding of offences under direct tax laws, 2019 that the government announced on Friday disallows compounding of offences related to benami transactions and undisclosed foreign income. The tougher approach in dealing with tax evasion comes at a time when direct tax revenue collections in FY19 is estimated to be below the revised target of 12 trillion. Finance ministry had set a direct tax collection target of 13.8 trillion for FY20 in the interim budget presented in February.

The Central Board of Direct Taxes (CBDT), the apex direct tax policy making body, said in the new guidelines that any offence connected to undisclosed foreign bank account or assets in any manner cannot be compounded. India had introduced the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act in 2015 to curb unaccounted wealth kept abroad and to impose tax and penalty on such wealth. CBDT also said in the new guidelines that offences linked to any wrongdoing covered under the Benami Transactions (Prohibition) Act 1988 are also not compoundable.

"Compounding of offences is not a matter of right," said the new guidelines. The guidelines will apply to requests for compounding filed from Monday onwards, while the pending ones will be governed by the norms that existed earlier.

India has been tapping all available sources of information from its tax treaty partner countries to identify those who have foreign income which is not disclosed. India and the US now share information about financial assets their respective citizens have in the other country but have not disclosed to tax authorities back home. Such sharing of information across national borders have made it harder to hide wealth abroad.

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