The government has recently introduced the Undisclosed Foreign Income and Assets Bill, 2015, commonly known as the Black Money Bill.
The income tax department has altered its view from civil consequences to criminal consequences for serious instances of tax evasion.
The Finance Minister has stated that the government has shifted its attention to prosecuting the tax evaders in the shortest possible time.
Proceedings have been initiated against 60% account holders holding accounts in the Geneva branch of HSBC bank whose names have been provided in a report.
As per provisions of the new Bill, the concealment of foreign income and assets will not be compoundable and offenders shall not be allowed to approach the Settlement Commission to resolve their disputes.
The beneficiaries of foreign assets will be required to file return though there is no taxable income.
The proposed Act will be applicable to all people staying in India. The Act will apply to both undisclosed foreign income and assets. It will also include economic interest in any entity.
Rate of tax:
The rate of tax for undisclosed foreign income or assets shall be 30%. No exemption or set off of any carried forward losses that is normally allowed under the present Income Tax Act, 1961, shall be allowed in the Act.
Penalties proposed in the Bill:
Violation of the provisions of the new Act shall invite penalties. The penalty for non-disclosure of income or an asset situated outside India shall invite a penalty up to three times the amount of tax payable which means that the tax shall be equal to 90% of the undisclosed income or the value of the undisclosed asset. The same shall be in addition to tax payable at the rate of 30%.
Failure to file return in connection with foreign income or assets shall attract a penalty amounting to Rs.10, 00,000/-.
The same amount of penalty shall be applied to cases where the assessee has filed his return, but has not disclosed the foreign income or asset or has furnished incorrect details of the same.
The Bill proposes punishment for different kinds of violations. The punishment for willful attempt to evade tax in connection with foreign income or an asset located outside the country will be rigorous imprisonment for a term ranging from three to ten years and also a fine.
Failure to file return in connection with foreign assets and bank accounts or income will attract rigorous imprisonment for a term of six months to seven years. The same punishment will apply to cases where the assessee has filed a return but has not disclosed the foreign asset or has provided inaccurate details of the same.
Abetment of another individual to make a false return or a statement or a declaration under the Act will attract rigorous imprisonment for a term of six months to seven years. This provision will also be applicable to banks and financial institutions helping a resident Indian to conceal his foreign income or asset.
The principles of natural justice have been followed in the Act by providing the requirement of mandatory issue of notices to people against whom proceedings are started. The Act provides opportunity of being heard, recording of evidence produced by an assessee, recording of reasons, passing of written orders, limitation of time for actions of the authority, etc.
Moreover, the right of appeal before the Income Tax Appellate Tribunal has been provided in the Bill. The High Court and the Supreme Court shall also have jurisdiction to deal with substantial questions of law.