Taxation And Investment Regime For Pradhan Mantri Garib Kalyan Yojana, 2016

1. Taxation And Investment Regime
For
Pradhan Mantri Garib
Kalyan Yojana, 2016
“Yet another chance to Come Clean”
By:
Direct Tax Vertical
Asija & Associates LLP
Chartered Accountants
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2. Do or die for black money holders
An opportunity to all the Black Money holders to
come out clean by declaring their undisclosed
income and paying heavy taxes and penalty.
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3. Coverage
1. What is Pradhan Mantri Garib Kalyan Yojana, 2016?
2. Step wise process for making Declaration
3. Amount payable by declarant
4. Pradhan Mantri Garib Kalyan Deposit Scheme, 2016
5. Time and manner of declaration
6. Operational Guidelines
7. The Insider View
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4. Coverage
8. A Illustration
9. Declaration when void
10.Advantages of the Scheme
11.Disadvantages of the scheme
12.On whom does the sceme does not apply?
13.In comparison with IDS
14.A Comparative study with IDS.
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5. 1-What is Pradhan Mantri Garib Kalyan
Yojana, 2016?
Any person may make (on or after the date of commencement of the
Deposit Scheme but on or before a date to be notified by the Central
Government in the Official Gazette), (Sec - 199C)
 a declaration in respect of any income (in the form of
cash/deposit in any bank/post office account)
 chargeable to tax under the Income Tax Act
 for the assessment year 2017-18 (or any earlier assessment year).
 No deduction in respect of any expenditure or allowance or setoff of
any loss shall be allowed against the income so declared.
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6. 2 – Step wise Process for Making Declaration
Payment of Tax,
Surcharge and
Penalty
Deposition of 25 % of
the disclosed income
in the PM Garib
Kalyan Deposit
Scheme, 2016.
File The Declaration
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7. 3-Amount payable by declarant
Tax @30% of income declared (Sec - 199D)
Surcharge @33% of Tax (Pradhan Mantri Garib Kalyan Cess)
Penalty @10% of income declared (Sec - 199E)
Effective rate: @ 49.9% of undisclosed income payable to
government.
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8. 4-Pradhan Mantri Garib Kalyan
Deposit Scheme, 2016
1. The person making above declaration shall deposit at least 25 % of
undisclosed income in the Pradhan Mantri Garib Kalyan Deposit
Scheme, 2016 (Sec - 199F).
2. The deposit shall bear no interest and the amount so deposited
can be withdrawn only after 4 years from the date of deposit.
3. Further the depositor shall be required to fulfil such other
conditions as may be specified in the said Deposit Scheme 2016.
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9. 5-Time and manner of Declaration
1- Before submitting the above declaration, the declarant shall:-
• Pay Tax, surcharge and penalty (i.e., 49.9 %).
• Deposit at least 25% of the declared income in the deposit Scheme 2016.
• The declaration shall be accompanied by proof of deposit of tax, surcharge
and penalty
2-The declaration shall be made by a person competent to verify the
return of income under Section 140 of the Income-tax Act,
3-The declaration shall made to the Principal Commissioner or the
Commissioner, to be notified.
4-Declaration shall be in such form and verified in such manner, as may
be prescribed. (Sec - 199G)
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10. 6-Operational Guidelines
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Application forms for deposits under the Scheme (PMGKDS), will be received at
Authorised Banks from 17th December, 2016 till 31st March, 2017.
An application for the deposit shall be made in Form II indicating full name,
address, PAN and Bank Account Details.
It shall be accompanied by an amount (at least 25%) tendered in the form of
cash, draft, cheque or electronic transfer.
The acknowledgement receipt shall be provided by the bank.
The Bank shall electronically furnish the details of deposit made in Form V to
the Department of Revenue, the next day.
The Department shall verify the information of deposit before accepting the
declaration.
The Bank shall maintain the confidentiality of the data received.

11. 6-Operational Guidelines
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On receipt of the details at RBI, Bonds Ledger Accounts shall be created and the deposits
made under the scheme shall be held at the credit of the declarant.
A certificate of holding shall be issued to declarant in Form I.
The holder can nominate one or more persons.
No interest shall be payable on the deposits.
The Authorised Bank shall upload the details of deposit into Reserve Bank of India’s Core
Banking Solution ‘e-Kuber’ system.
The Holding Certificates will be sent to the authorized banks through e-Kuber which may
be issued to the customers.
Authorised banks will provide necessary services with regards to deposit made by the
declarant e.g. updating bank account details, cancellation of nomination, etc. Authorized
Banks will be required to preserve applications until repayment is made.

12. So do you think the effective pay out by the declarant is 49.9% ?
NO
Its not just 49.9% tax of undisclosed income
The notional loss he suffers due to the
 lock in period of 4 years due to deposit made under this
scheme; and
 The inflation rate
Makes the effective rate equal to about 57%.
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7- The Insider View

13. 8- An Illustration
Under Pradhan Mantri Garib Kalyan Yojana 2016 Amount
Undisclosed Income 10,00,000
Tax on Undisclosed Income (u/s 199D) (@ 30%) 3,00,000
Surcharge (@ 33% of tax) 99,000
Penalty (@ 10% of income declared) 1,00,000
Total Tax on above (@ 49.9%) 4,99,000
Deposit in Deposit Scheme (@ 25%) 2,50,000
Future Value of the Deposit account (Since, it is locked for 4 years &
average inflation of 8 %)
1,79,100
Indirect Loss as on this day 70,900 or 7.1%
Total loss( 49.9 % + 7.1 % ) 57 %
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14. 9-Declaration when void
Where a declaration has been made by:-
Misrepresentation or suppression of facts or
Without payment of tax and surcharge as specified u/s 199D or
Without payment of Penalty as specified u/s 199E or
Without depositing the amount in the Deposit Scheme as specified u/s
199F
such declaration shall be void and shall be deemed never to have
been made under this Scheme.
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 Importantly, any tax and surcharge paid under this scheme shall
not be refundable. (Sec-199K)

15. 10-Advantages of the Scheme
 The undisclosed income will not be included in total income of the
declarant for any assessment year.
 Nothing contained in any declaration shall be admissible in evidence
against the declarant for the purpose of any proceeding under any Act
(other than certain specified Acts as detailed in slide 18).
 It would be the last chance to come clean for black money holders. Any
detection of black money by AO thereafter (other than search cases)
would attract 83.25% tax.
 The declaration can be made for the current year as well as for any
previous assessment years.
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16. 11-Disadvantages of the Scheme
 No deduction in respect of any expenditure or allowance or set-off of any
loss shall be allowed against the income in respect of which a declaration
is made.[Sec - 199C (2)]
 A declarant under this Scheme shall not be entitled, in respect of
undisclosed income referred to in Section 199C or any amount of tax and
surcharge paid thereon, to re-open any assessment or reassessment
made under the Income-tax Act or the Wealth-tax Act, 1957.
 Any amount paid as Tax, surcharge or penalty, under this scheme shall
not be refundable.
 Declaration can be made only for Cash deposition and not for any other
assets.
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17. 11-Disadvantages of the Scheme
 Immunity under Benami Transaction Act or other such law is not being
provided.
 No immunity against penalty and prosecution under the Income Tax or
any other law is available.
 No immunity against the tax and interest in case of other tax laws like
service tax, sales tax, etc is available.
 The provisions of Chapter XV of the Income Tax Act relating to liability in
special cases and Section 119, Section 138 and Section 189 shall apply
in relation to proceedings under this scheme.
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18. The deposit scheme shall not be available to persons involved in
or indicted in the specified manner in any illegal activity as
covered under the following Acts:-
12-On whom does the scheme
Does not apply?
The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974;
Chapter IX or Chapter XVII of the Indian Penal Code;
The Narcotic Drugs and Psychotropic Substances Act, 1985;
The Unlawful Activities (Prevention) Act, 1967;
The Prevention of Corruption Act, 1988;
The Prohibition of Benami Property Transactions Act, 1988 and the Prevention of
Money Laundering Act, 2002;
Any person notified under section 3 of the Special Court (Trial of Offences Relating to
Transactions in Securities) Act, 1992;
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19. 13-In comparison with IDS
 The declaration can only be made with respect to cash deposits to the
specified entity. However, in case of IDS, we can also declare other
immovable and movable assets.
 A person can make a declaration under the above scheme (PMGKY) in
more than one capacity as against IDS in which he can make a
declaration only in one capacity.
 The critical dates with respect to payment of tax, surcharge and penalty
and for making a declaration is not yet provided as against IDS in which
definite timelines were defined.
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20. 14- A Comparative Study with IDS
Under IDS Under Pradhan Mantri garib Kalyan
Yojna 2016
Undisclosed Income 10,00,000 Undisclosed Income 10,00,000
Tax on Undisclosed Income (u/s 199D)
(@ 30%)
3,00,000
Surcharge (@ 33% of tax) 99,000
Penalty (@ 10% of income declared) 1,00,000
Tax on above
(@ 45%)
4,50,000 Total Tax on above (@ 49.9%) 4,99,000
Deposit in Deposit Scheme (@ 25%) 2,50,000
Present Value of the Deposit account
(Since, it is locked for 4 years &
average inflation of 8 %)
1,79,100
Indirect Loss 70,900 or 7.1%
Total loss( 49.9 % + 7.1 % ) 57 %
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21. 14-Certain unplugged queries
Will immunity be provided under other economic laws including Service
Tax, VAT, Companies Act, SEBI Act, etc?
If a person declares only a part of his undisclosed income, will he get the
immunity under the scheme in respect of the income declared?
Whether at the time of declaration, will the Commissioner make any
enquiry in resect of such declaration ?
Whether this scheme is open only to residents?
Whether there is any time limit for the declarant to file the declaration
under this scheme?...........
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22. Asija & Associates LLP22
For a detailed discussion and professional advisory pertaining to the
applicability and compliance of the said provision of law by your entity .
Fix an Appointment with our Direct Tax Vertical
Email @ incometax@asija.in
CA Vasudha Jain
Asso. Director
(vasudha.jain@asija.in)
CA Ashish Kapoor
Partner In Charge
(ashish.kapoor@asija.in)
Asija & Associates LLP
Chartered Accountants
Ph. no. : 0522- 4004652, 2205072

23. • DISCLAIMER:-
 This presentation has been prepared to provide a gist of the
applicable law pertaining to Pradhan Mantri Garib Kalyan Yojana,
2016 for which Taxation Laws (Second Amendment) Bill, 2016
introduced in Lok Sabha.
 For detailed insight and for better understanding of the various
provision of the said law, the said presentation should be read
along with related provision of Income Tax Act, 1961 and Income
Tax Rules,1962 and the Finance Act, 2016.
 We shall not be responsible for any decision taken on the basis of
the said presentation, without obtaining our professional guidance
or consultation on the matter for which reliance was made on this
presentation.”
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Thank You.