Source: News Bharati English28 Nov 2016 16:50:04

New Delhi, November 28: Nearly three weeks after Prime Minister Narendra Modi announced scrapping 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 mandatory depositing of 25 percent of the amount disclosed in anti-poverty scheme without interest and a four-year lock-in period.


Similarly, with the new amendments, the Centre has now come out with "Pradhan Mantri Garib Kalyan Yojana 2016" to enable people with undisclosed income to come clean.

However, they would have to pay a tax of 30 per cent and penalty of 10 per cent. A surcharge in the form of cess of 33 per cent will have to be paid on the tax.

In addition to tax, surcharge and penalty, the declarant will have to deposit 25 per cent of undisclosed income in a deposit scheme to be notified by the Centre in consultation with the RBI.

This amount is proposed to be utilised for programmes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood etc, so that there is justice and equality.

A 75 per cent tax and 10 per cent penalty in case Income Tax authorities detect undisclosed wealth deposited post demonetisation.

The current provisions of penalty on under-reporting of income at 50 per cent of the tax, and misreporting (200 per cent of tax) will remain and no changes are being made to them.

Under-reporting/misreporting income is normally the difference between returned income and assessed income.

The Taxation Laws (Second Amendment) Bill, 2016 proposes to amend Section 115BBE of the Income Tax Act to provide for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.

Here are the full details of The Taxation Laws (Second Amendment) Bill, 2016

The Finance Ministry recognizes that the evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage.

Ci=onsidering those concerns, that have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

An overview of the amendments proposed in the Bill are placed below;

An overview of the amendments proposed in the Bill are placed below;

Overview of Amendments Proposed                                                       

PARTICULARS

EXISTING PROVISIONS

PROPOSED PROVISIONS

 

 

 

General provision for penalty

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)

No changes proposed

Provisions for taxation & penalty of unexplained credit, investment, cash and other assets

TAX  (Section 115BBE)

Flat rate of tax @30% + surcharge + cess

(No expense, deductions, set-off is allowed)

 

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%.

Penalty for search  seizure cases

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

Penalty (271AAB)

(i) 30% of income, if admitted, returned and taxes are paid

(ii) 60% of income in any other case

Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)

New Taxation and InvestmentRegime

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.