India unveils stiff law for black money stashed abroad

Wednesday 25th March 2015 05:52 EDT

The Narendra Modi government unveiled a set of stringent provisions, including a 90% penalty on those who have undisclosed foreign assets and income overseas as it introduced a Bill to deal with black money stashed abroad. This will be above the 30% levy on the value of assets or income that will be imposed.

But those who want to avoid the hefty penalty will be given the option to pay 30% penalty of the value of undisclosed assets and avoid prosecution, the Undisclosed Foreign Income and Assets Bill introduced in the Lok Sabha proposed. Although the government wants the law to be active from April 2016, it has not specified how long the one-time compliance window would be open. The Bill has also detailed safeguards to prevent any misuse of the stiff provisions by tax authorities. Apart from penalty, the bill provides imprisonment of up to 10 years for concealment, non-disclosure, false declaration as well as abetment. The provision for abetment can put financial advisers and chartered accountants in the crosshairs of the law should they be deemed guilty of cooking the books.

“It's not an amnesty scheme because under amnesty you only pay tax, and no penalty. Here the requirement is to pay tax at 30% and equivalent 30% as penalty. The intention of the government is not to give a soft landing facility to anyone. The one-time compliance opportunity is to enable such people who have hidden assets abroad to come clean and avail of the opportunity. It is not a revenue mobilization measure,” revenue secretary Shaktikanta Das said. Asked about the time frame of the compliance window, Das said it would be notified after the passage of the bill.

The Bill, was announced by finance minister Arun Jaitley in his budget speech on February 28, as the BJP government moved to smother the criticism of going soft on black money, a key poll plank during the 2014 general elections. The Bill is the latest move to get money stashed overseas back into India, even as the tax department has also asked its officers to focus on illegal wealth within the country as well.

Apart from the penalty, the legislation also lists a 10-year jail term for “wilful attempt to evade tax.” Anyone who possesses or controls documents or books of accounts with false entries or statement, wilfully omits entries or statements in the papers, or takes steps that result in tax evasion will be treated as wilful evader. “In the prosecution proceedings, the wilful nature of the default shall be presumed and it shall be for the accused to prove the absence of the guilty state of mind,” the government said.

Further, the Bill has proposed imprisonment of six months to seven years for failure to provide details of foreign assets and income, or interest in a overseas entity, in tax returns as well as for making false statement. A similar term is proposed for those abetting making of false statement, a move that will impose a burden on chartered accountants and financial advisers who are often involved with overseas transactions.

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