Another blow dealt by the Centre to those holding black money; Govt presents bill to amend Income Tax Act, 50 % tax and penalty to be levied on voluntary disclosures made after 8th November; 25% to be locked in for 4 years under Garib Kalyan Yojana; Tax up to 85% to be levied on those caught with undisclosed income.
Finance Minister Arun Jaitley tabling the Income Tax Amendment Bill in the Lok Sabha, a bill that not only reiterates the govt’s intent to wipe out blackmoney, but also sets out concrete steps towards achieving this end.
The amendments in the IT Act have been proposed to check measures that people are adopting to evade tax after government announced demonetisation of Rs 500 and Rs 1,000 notes. Changes to the income tax law were approved by Union Cabinet on Thursday.
A Taxation and investment regime for the game changing Pradhan Mantri Garib Kalyan Yojana 2016 has been proposed in the bill.
As the name suggests, the aim is to divert black-money collected post-demonetisation into welfare schemes for the poor.
The bill provides for three possible scenario. The first case involves a voluntary declaration of black money. Here the declarant shall be required to pay tax at 30% of the undisclosed income and penalty at 10% of the undisclosed income. A surcharge pradhan mantri garib kalyan cess at 33% of tax is also proposed. In addition to tax, surcharge and penalty the declarant shall have to deposit 25% of undisclosed income in a deposit scheme for a period of 4 years. This amount deposited for 4 years is proposed to be utilised for welfare schemes like irrigation, housing, infrastructure.
In the second scenario, those who continue to hold onto undisclosed cash and are caught, existing provisions of the Income Tax law will be amended. In such a case, a flat rate of 60 per cent plus a surcharge of 25 per cent of tax will be charged. This amounts to a levy of 75 per cent of undisclosed amount. Besides, an additional 10 per cent penalty can also be levied.
In the third case scenario, if any black-money is unearthed during a search and seizure, a 30% penalty will be charged above taxes if an admission is made and this will be doubled to 60% if in any other case.
The disclosures in PMGKY scheme will ensure that no questions will be asked about the source of fund. It would ensure immunity from wealth tax, civil laws and other taxation laws. But there is no immunity from FEMA, PMLA, Narcotics, and black money act.
All disclosed income including that upto Rs 2.5 lakhs can come under scrutiny. This virtually means that all declared income will be verified. However, only income found to be from invalid means will be taxed and penalised.
The PMGKY will be notified once the Tax amendment bill is passed in Lok Sabha and is likely to remain in force till the 31st of Dec which is the also the deadline for depositing all old currency.
As the name suggests, the aim of this bill is to plug loopholes in the IT act to maximize tapping black money and to ensure that the funds collected post-demonetisation are used for welfare schemes for the poor.