The Government has finally come out with it's much awaited plan for unaccounted deposit with 50% tax while defaulters will be charged 85% tax if caught.
This has come after three weeks, when the Prime Minister Narendra Modi announced banning high denomination 500 and 1000 rupee notes. Finance Minister Arun Jaitley introduced a bill to amend the Income Tax law which also provides for black money declarants a mandatorily depositing of 25 per cent of the amount disclosed in anti-poverty scheme without interest and a four-year lock-in period.
Those who choose to declare their ill-gotten wealth stashed till now in banned 500 and 1000 rupee notes under the Pradhan Mantri Grabi Kalyan Yojana 2016, will have to pay a tax at the rate of 30 per cent of the undisclosed income.
Additionally, a 10 per cent penalty will be levied on the undisclosed income and surcharge called PMGK Cess at the rate of 33 per cent of tax (33 per cent of 30 per cent).
Further, the declarants have to deposit 25 per cent of the undisclosed income in a scheme to be notified by the government in consultation with the Reserve Bank of India (RBI).
Overview of Amendments Proposed
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PARTICULARS
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EXISTING PROVISIONS
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PROPOSED PROVISIONS
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General provision for penalty
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PENALTY (Section 270A)
Under-reporting - @50% of tax
Misreporting - @200% of tax
(Under-reporting/ Misreporting income is normally difference between returned income and assessed income)
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No changes proposed
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Provisions for taxation & penalty of unexplained credit, investment, cash and other assets
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TAX (Section 115BBE)
Flat rate of tax @30% + surcharge + cess
(No expense, deductions, set-off is allowed)
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TAX (Section 115BBE)
Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx.
(No expense, deductions, set-off is allowed)
PENALTY (Section 271AAC)
If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.
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Penalty for search seizure cases
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Penalty (271AAB)
(i) 10% of income, if admitted, returned and taxes are paid
(ii) 20% of income, if not admitted but returned and taxes are paid
(iii) 60% of income in any other case
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Penalty (271AAB)
(i) 30% of income, if admitted, returned and taxes are paid
(ii) 60% of income in any other case
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Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)
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New Taxation and InvestmentRegime
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Undisclosed income in the form of cash & bank deposit can be declared:
(A) Tax, Surcharge, Penalty payable
Tax @30% of income declared
Surcharge @33% of tax
Penalty @10% of income declared
Total @50% of income (approx.)
(B) Deposit
25% of declared income to be deposited in interest
free Deposit Scheme for four years.
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