India's new 'Black Money Act'
The Indian Government has launched an unprecedented and multi-pronged attack to root out the menace of black money stashed abroad.
In his maiden Budget earlier this year, India's finance minister announced the Government's decision to enact a comprehensive new law to deal with undisclosed foreign income and assets or 'black money'. Since then, The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill 2015, was approved by India's two houses of parliament, and on 26 May 2015 it was given assent by the President of India.
The Act, commonly known as the Black Money Act, comes into force on 1 April 2016 and will cover Indian residents. It applies to undisclosed foreign income and assets, including financial interest in any entity. The Act does not distinguish between the owner of the asset and beneficial owner of the asset. Respite from penalty and prosecution has been given to bank accounts with up to INR 500,000 (approximately US$7,800).
Rate of tax
Undisclosed foreign income and fair value of undisclosed foreign assets will be taxed in India at a flat rate of 30%, with no deductions, exemptions or set-off of carried forward losses available under the existing Indian direct tax laws.
There are stringent penalties for violation of the provisions of the Act. For non-disclosure of income or the value of an asset located outside India, there will be a penalty of 300% of the amount of tax payable. In addition, failure to declare return of income or non-disclosure or providing inaccurate information with regard to foreign income or assets in the return of income will attract a penalty of INR 1million (US$16,000).
Willful attempts to evade tax in relation to foreign income or an asset located outside India will also be punished with imprisonment of three to ten years, along with a fine. Further, failure to provide a return of income, non-disclosure or providing inaccurate information with regard to foreign income or assets in the return of income will be punishable with imprisonment of between six months and seven years.
Abetting or inducing another person to make a false return or a false account under the Act will also be punishable with imprisonment from six months to seven years. This will also apply to banks and financial institutions that aid the concealment of foreign income or assets of resident Indians, and for the falsification of documents.
One-off compliance opportunity
The Government is offering a one-off compliance opportunity for people affected to come clean before the provisions come into force next year. The opportunity, which will save those affected from prosecution, is available for a limited period by paying tax at a rate of 30% and an equal amount in penalty.
For more information, contact:
Chaturvedi & Shah, India
T: +91 22 4009 0645