Prime Minister Modi announced that Rs. 6,500 crore of undisclosed income had been declared under the Black Money Act as part of a one-time compliance window. This allows those with undisclosed foreign assets to declare them by September 30, 2015 by paying a tax and penalty totaling 60% of the assets' fair market value to receive amnesty. The Act aims to curb black money and targets undisclosed foreign income and assets not previously declared in tax returns, imposing a 30% tax on such amounts. It provides an opportunity for tax evaders to come clean before more stringent provisions take effect.

1. Contributed By
CA. Ashwani Rastogi
ashwani.rastogi.ca@gmail.com
# 9990999281
Black Money Act
Committing to carry forward the fight against black money, Prime Minister
Narendra Modi, in his address to the nation on the 69th Independence Day,
said "So far, Rs. 6,500 crore of undisclosed income have been declared, which
will be used for the welfare of the people.”
Why should anyone keep money abroad? All the more when they have to pay
heavy amount just to park their funds outside India particularly in Swiss Bank
as they charge hefty amounts even for a deposit. That essentially means that
only those having undisclosed source of income popularly known as black
money would be relying upon such costly options.
Another supporting fact to this is that India has the one of the highest rate of
return approximately about 15-18% annually, way above global standards. And
above all in recently RBI has announced Liberalised Remittance Scheme(LRS)
allowing upto $250,000 per person per year as foreign investment. Similarly
there lot more that can be allowed as foreign investment through various
routes.
Target Black Money
So, are there benefits of the one time amnesty under Black Money Act,
specially if someone has huge amount of cash stashed abroad and has never
been declared in his or her IT returns in all these years. The answer would be
definitely yes, if you are ready to part with 60% (30% tax and equivalent
amount of penalty) of the fair market value(FMV) of the asset till 30th
September 2015. And, what one gets in return is a clean chit from the
government.
The best feature of this one time window is that there are no questions asked
what-so-ever in relation to your foreign undisclosed assets. The only
consideration that will count is the FMV of such an asset and a lump-sum tax
payment.

2. To explain the stringent clauses in the Act here are some illustrations:
Situation 1:
I have some properties in USA which were actually inherited from my father in
1981 originally worth $ 1,00,000 (present FMV--$ 10,00,000) but now I fail to
satisfy my assessing officer(AO) on the source of that property as per the
provisions of this particular act.(BMA requires you to explain how my father
owned such a property) Hence, the one time amnesty scheme would be
beneficial for me. I just have to pay 60% of the present value. Here I may not
have any choice as now Income Tax Act allows the AO to go back upto 16 years
in case tax evasion is suspected in respect of foreign assets.
Situation 2:
If I as an American citizen became resident of India in 2010 all my global
incomes would be liable to Income tax since that particular year. However, I
might have a liability under the latest BMA. In case I have a million dollar
deposit with a US bank dating back to pre-2010 period and I have not
disclosed it in my returns in India. I might not be able to explain my situation
to the AO, as procuring old bank statements, receipts etc might be a difficult if
not impossible task. Under the provisions of BMA if I am unable to prove
source of my income while I was not a resident, I will still be liable to tax on all
credit entries in my foreign bank account.
Important Dates for Amnesty:
The Central Government has notified 30th September, 2015, as the date on or
before which a person may make a declaration in respect of an undisclosed
asset located outside India under the compliance provisions of the Black Money
Act.
The last date by which a person must pay the tax and penalty in respect of the
undisclosed foreign assets so declared shall be the 31st December, 2015.
Highlights of Black Money (Undisclosed Foreign Income and Assets) and
Imposition of Tax Act, 2015
 Act is effective from 1 April 2016 onwards (Assessment Year 2016-
17) and extends to whole of India.
 Applicable to all persons resident in India. In case of Individuals, it
applies to ordinary resident under ITA.
 Flat 30% tax rate (without surcharge and cess) on the value of total
undisclosed foreign income and asset plus penalty 90% additional
to tax however penalty reduced to 30% if self-declaration made in
one time opportunity by 30th September.
 If self-declaration is in respect of UFAs then tax would be levied at

3. 30% plus penalty (equal to tax) i.e. total 60%
 One time compliance scheme window for disclosing any UFA
acquired from income chargeable to tax under ITA for any
assessment year prior to AY 2016-17.
 Self-declaration is an opportunity for persons to come clean and
become compliant before the stringent provisions of the new Act
come into force
 Tax will be on value of UFA as on the date of enactment of this new
legislation
 No exemption, deduction or set-off of any carried forward of losses
 Amount of UFA so declared shall not be included in the total
income of any assessment year in ITA
 No reopening of assessment due to disclosure under this scheme -
Declaration will not affect finality of completed assessment
 Contents of declaration cannot be used as evidence for imposing
penalties under any other law or for prosecution under ITA, Wealth
tax, FEMA, Companies Act 2013, or Customs Act 1962
 No Wealth Tax on UFA declared. Assets declared by firm shall not be
considered in computing net wealth of individual partner or value
of interest of any partner
Computation of tax on UFIA
 UFIA will be taxed @ 30% - no surcharge and cess
 Tax will be charged on its value in the previous year in which UFIA same
is noted by AO
 Value of UFA means fair market value of an asset ‘including financial
interest in any entity) in the previous year in which it comes to AO’s
notice– method of valuation to be prescribed
 Manner for Computation of total UFIA (Section 4)
Computation of total UFIA
Income from source located outside India
(foreign income ‘FI’) which has not been
disclosed in IT Return
100
FI in respect of which no IT return has been filed 200
Total UFA 300

4. FMV of UFA (no explanation or unsatisfactory
explanation about the source of income has
been provided – Section 4(3))
300
including
appreciation
or
depreciation
 If UFIA is taxed under this new legislation, it will not be taxed under ITA
 Hardship to the assessee as tax and penalties proposed to be calculated
at current value of assets instead of original purchase price.
 However, Finance Bill 2015 proposes that the Enforcement Director
under FEMA can directly seize equivalent value of Indian assets (without
asking any questions) and merely on the reason to believe or suspicion –
similar amendments are also proposed under Prevention of Money-
laundering Act, 2002 (PMLA) vide Finance Bill 2015
Coming back to what Prime Minister quotes, it seems to be a good figure, which
is expected to grow many folds by September 30th, 2015. However, there are a
few irritants like no relief has been given against double taxation under UFIA
and corresponding laws in foreign jurisdiction. CBDT has already released first
set of FAQ’s on related issues, second set is also expected soon to clear the grey
areas in the law.
The moot question is whether this is a good enough opportunity? Theoretically
speaking it is a decent product. As for a 10 lakh dollar asset abroad a 6 lakh
dollars tax & penalty is much better than paying 12 lakh with imprisonment
and other harassment.
On a lighter note as you might be thinking of paying 60% on FMV—I feel many
with hefty liabilities may be thinking of finding the way-out for immigration
abroad instead of getting a clean chit from India under BMA.