The government introduced a Bill on Friday in the Lok Sabha with harsh provisions for those stashing abroad unaccounted money. In case, a company has abetted in this crime, every one involved, including the company, would also face these provisions.
The Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015 — black money Bill, in popular parlance — has some safeguards. For instance, failure to report bank accounts with a maximum balance of up to Rs 5 lakh at any time during a year will not entail a penalty or prosecution. This is aimed at protecting persons holding foreign accounts with minor balances which might not have been reported out of oversight or ignorance.
A short window would be provided to those having illicit money abroad to declare their assets, says the Bill. A 30 per cent tax and as much penalty would be imposed on those availing this window but they would not be prosecuted. It means of every Rs 100 so declared, the government would take Rs 60.
The government refused to call it an amnesty or a voluntary disclosure of income, as a penalty will also be imposed, beside the tax. However, ‘naming and shaming’ could be done, an official said, though he added this would be decided in the course of the debate in Parliament.
Revenue secretary Shaktikanta Das said, “The new law will not apply to people against whom the legal process or the assessment process or the due process has already been initiated by the income tax (I-T) department. So, where we already know about the cases, they will not be ale to get the benefit of the compliance window…This is no amnesty scheme.”
The Bill seeks to impose a penalty for non-disclosure of income or of an asset located outside India, at three times the amount of tax payable thereon — that is, 90 per cent of the value. This is in addition to tax payable at 30 per cent. Any exemption and deduction will be disallowed and the owner or beneficiary will be required to file a return even if there is no taxable income, the Bill says.
Failure to furnish a return in respect of foreign income or assets will attract a penalty of Rs 10 lakh. The same amount of penalty is prescribed for cases where although the assessee has filed a return of income, he has not disclosed the foreign income and asset or given inaccurate particulars of these.
The punishment for willful attempt to evade tax on a foreign income or an asset located outside India will be rigorous imprisonment from three years to 10 years.
The Bill also seeks to make non-compoundable the offence of stashing away unaccounted money abroad. Offenders will also not be allowed to approach the Settlement Commission and non-filing of return or filing of return with inadequate disclosure of foreign assets will be liable for imprisonment up to seven years.
In prosecution, the wilful nature of the default will be presumed and it will be for the accused to prove the absence of a guilty state of mind.
Later, Finance Minister Arun Jaitley told reporters, “No indian can hold unauthorised and undisclosed assets or income outside this country. Those who hold it initially will have to pay taxes, disclose the asset and bring the money back to India. If they don’t do that, they are going to be severely prosecuted under this law.”
He hoped the Bill would come for discussion in the second half of the ongoing session, from April 21.
Even abettors of the above offences — persons, entities, banks and financial institutions — will be liable for prosecution and penalty. Abetment or inducement of another person to make a false return or a false account or statement or declaration will be punishable with rigorous imprisonment from six months to seven years.
The Bill says,”where an offence under this Act has been committted by a company, every person, who at the time the offence was committed, was in charge of, and was responsible to… as well as the company shall be deemed to be guilty of the offence.”
Vidya Rajarao, partner, forensic services, Grant Thornton India LLP, said: “The penalties proposed (of imprisonment) are severe enough to deter such practices (stashing away illicit money abroad).”
There are some safeguards on process. It would be mandatory to issue a notice to the person against whom proceedings are being initiated, giving an opportunity of being heard, necessary to take the evidence produced by him into account, record reasons and pass orders in writing. Also, limitation of time for various actions of the tax authority.
Further, appeals are allowed to the I-T appellate tribunals and to the jurisdictional high court and Supreme Court on substantial questions of law. Other safeguards and internal control mechanisms will be prescribed in the rules.
Getting back black money, particularly that hidden abroad, was one of the main planks of the Bharatiya Janata Party in last year’s general election. The issue gathered pace after the Supreme Court last year gave a list of 628 entities in the ‘HSBC-Geneva’ list to a Special Investigative Team (SIT). Many of these are getting ‘time-barred’ by the end of this financial year, that is, these cannot be acted against after the said period. The SIT on black money has widened its probe after revelations in this regard were made recently by an International Consortium of Investigative Journalists.
According to the consortium’s report, 1,195 Indians, nearly double the previous list of 628 shared by the French government with India, figure in the HSBC list, with a total balance of Rs 25,420 crore. Many of the names have been in the public domain but there are additions, including those of corporate leaders, politicians and non-resident Indians.
Jaitley had said the veracity of the new names of Indians alleged to have Swiss bank accounts would be checked. There is no official estimate of black money stashed abroad. A report by a non-profit body, Global Financial Integrity, says India lost $ 439.59 billion (about Rs 28 lakh crore) to illicit outflows from 2003 to 2012. India ranked third in the world in illicit outflows at $ 94.76 billion (about Rs 6 lakh crore) in 2012, according to the report.
Concealing income or evading tax related to foreign assets will be made a ‘predicate offence’ — a crime that provides resources for other criminal acts such as money laundering. Thus, these will be taken as offences under the Prevention of Money Laundering Act (PMLA).
This will enable enforcement agencies to attach and confiscate unaccounted assets held abroad and prosecute those involved in laundering black money. PMLA will be further amended to enable attachment and confiscation of equivalent assets in India when the assets located abroad cannot be forfeited.
Beside, the Foreign Exchange Management Act will be amended to enable action against a holder of foreign exchange, foreign security or any immovable property outside India in contravention of the law.
So far as circulation of black money in the domestic economy is concerned, a new and comprehensive Benami Transactions (Prohibition) Bill would be introduced, also in the current session of Parliament. This law will enable confiscation of benami property and provide for prosecution, aimed at blocking a major avenue for generation and holding of black money in the form of benami property.
Some of the features of the Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015