The Lok Sabha recently passed The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, after the government once again turned down the Opposition’s demand for referring the legislation to a standing committee.
- However, opposition parties say that the Bill does not prevent the generation of black money in the country and some members are apprehensive that this could become another tool in the hands of enforcement agencies to harass innocent people.
- The bill will now go to the Rajya Sabha, which will debate and return the bill since it has been termed a money bill. If it does not return the bill in 15 days, it would be deemed to be passed.
The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill:
The Bill will apply to Indian citizens and seeks to replace the Income Tax (IT) Act, 1961 for the taxation of foreign income. It penalizes the concealment of foreign income, and provides for criminal liability for attempting to evade tax in relation to foreign income.
Important provisions In the Bill:
- According to the provions of the Bill, those who conceal income and assets and indulge in tax evasion in relation to foreign assets can face rigorous imprisonment of up to 10 years. The offence will be non-compoundable and the offenders will not be permitted to approach the Settlement Commission for resolution of disputes.
- There will also be a penalty of 300% of taxes on the concealed income and assets.
- According to the Bill, undisclosed foreign income or assets shall be taxed at the flat rate of 30%. No exemption or deduction or set off of any carried forward losses which may be admissible under the existing Income-tax Act, 1961, shall be allowed. And concealment of income in relation to a foreign asset will attract penalty equal to three times the amount of tax (90% of the undisclosed income or the value of the undisclosed asset). This would be over and above tax at a flat rate of 30%.
- The Bill also proposes to make concealment of income and evasion of tax in relation to a foreign asset a ‘predicate offence‘ under the Prevention of Money Laundering Act, which will enable the enforcement agencies to attach and confiscate the accounted assets held abroad and launch proceedings.
- The Bill seeks to make non-filing of income tax returns or filing of returns with inadequate disclosure of foreign assets liable for prosecution with punishment of rigorous imprisonment of up to 7 years. To protect persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance, it has been provided that failure to report bank accounts with a maximum balance of upto Rs.5 lakh at any time during the year will not entail penalty or prosecution.
- The tax liability on an overseas property would be computed on the basis of its current market price, not the price at which it was acquired.
- The Bill provides for a short window for those holding overseas assets to declare their wealth, pay taxes and penalties to escape punitive action. Failure to furnish return in respect of foreign income or assets shall 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, but he has not disclosed the foreign income and asset or has furnished inaccurate particulars of the same.
- The Income Tax assesses with overseas assets will get a one-time opportunity for declaring them. The time-frame of the short window will be notified after the passage of the bill.
Sources: The Hindu, prindia, NDTV.