The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 passed in the Lok Sabha incorporates a compliance window for black money holders to use a last chance to come clean by paying nearly 60 per cent tax.
Under the compliance window provision, the undisclosed foreign income and asset holders should pay the tax and penalty with interest.
They can disclose it in a prescribed time and can make the penalty payment within six months to escape from hard measures including prosecution and imprisonment.
Similarly, the bill also has finalized the tax rate and penalty structure for the disclosing personsunder the compliance window scheme and for the erring persons.
The flat rate for black income holders is 30 per cent. For the disclosing persons, besides this 30 per cent tax, there is a penalty of another 30 per cent, under the compliance window.
In total, a disclosing foreign income or asset holder should pay 60 per cent tax to come clean and to make his income white.
There are no prosecution procedures as well for a disclosing income holder. He should complete the entire procedure of disclosing the income and paying the tax and penalty within the compliance window time line of six months.
For those who are not going to use the compliance window, the stringent provisions of the bill includes a total tax and penalty payment of 120 per cent of the black money.
Besides, there is rigorous imprisonment up to ten years awaiting the black money holder.
India’s black money held in foreign countries is not counted exactly. It is now interesting to see how much income will be disclosed. Similarly, it may be a windfall gain for the government in terms of tax revenue, if the disclosure is sufficiently high.