New Delhi: A stringent law imposing a steep 120 percent of tax and penalty on undisclosed foreign assets and income besides a jail term of up to 10 years to deal with black money stashed abroad was passed by the Lok Sabha Monday.
Before the new law comes into effect, a limited period window will be provided to people to declare their till now undisclosed income and assets, pay 30 percent tax and a similar amount as penalty and escape prosecution.
The Bill was passed by voice vote with support including from opposition, after Finance Minister Arun Jaitley dismissed apprehensions that innocent people will be harassed under the "deterrent" law saying the government does not intend to proceed against trivial violations but wont let big fish escape the net.
Piloting the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, Jaitley said there would be a short compliance window for persons having undisclosed income abroad to come clean by paying 30 percent tax and 30 percent penalty.
Once the compliance window closes, anyone found having undeclared overseas wealth would be required to pay 30 percent tax, 90 percent penalty and face criminal prosecution, he said while winding up the debate on the bill which was later approved by the House.
For those wanting to come clean, Jaitley said there would be a compliance window in two parts -- to declare assets and to pay 30 percent tax and a similar amount of penalty.
Citing an example, he said, there could be a two-month window to declare overseas assets and income and pay tax and penalty with six months period.
The new law will help bring black money in the declared economy, improve tax collections and would eventually facilitate lowering of tax rates, he said.
"This law will act as a deterrent...It will act as a deterrent and help us in getting the assets back by people declaring them," he said, adding the law also had a provision for attachment of equivalent properties in India.
While the new law was aimed at tackling black money abroad, a new Benami bill, aimed at curbing generation of domestic black money, will soon be taken to the Cabinet for approval, Jaitley said.
The Bill, which was introduced amid persistent demand for dealing effectively with black money stashed abroad, provides for rigorous imprisonment of up to 10 years for offenders.
On fears that innocent persons could get penalised, Jaitley said no action would be taken against persons having Rs 5 lakh or equivalent amount in their overseas bank accounts.
Rejecting the opposition charge that the stringent provisions could result in harassment of innocent people and students, he said, "we don't want to proceed against trivial violations. But then the big fish must not get away in the garb.
"Let us not fire from the shoulders of these innocent students in order to make sure that no harsh action is taken on the big fish itself."
Jaitley said the guidelines to be issued by CBDT will see the any innocent person, who does a lot of international travelling, are not covered under the new law.
"It is only resident who are assessed in India, who live here, those who hold legitimate assets abroad. If you hold it unlawfully, then you are liable for consequences," he said.
The Bill, which Jaitley said is a money bill, will now go to Rajya Sabha. Though the approval of the Upper House is not mandatory for a money bill and it only has to be returned, it is expected that the new law will not face any problem there.
Earlier while moving the bill for consideration, Jaitley turned down the opposition demand for referring it to the Standing Committee saying delay in enacting the law would provide opportunity to offenders to transfer unaccounted overseas wealth to unknown destination.
"If you hold (property) unlawfully, then you are liable for consequences," he said, adding the people can lawfully hold assets abroad.
Taking a jibe at the opposition, Jaitley said that he cannot issue a circular that "whoever goes to Madison Square should not be prosecuted. But I will certainly make sure that innocents are not the target."
The reference to Madison Square was about Prime Minister Narendra Modi's famous address to a large gathering of NRIs in the US in September last year.
On whether it was an amnesty scheme, Jaitley replied in the negative.
"The question is, is it an amnesty scheme. The answer is no. In amnesty scheme, you just take the tax and pardon the people. Here we are imposing a fresh tax, therefore giving a compliance window. Amnesty scheme also have a provision of naming and shaming. There is no provision here," he said.
He further added: "If you miss the compliance window, you have to go in for prosecution. It is an Act, the architecture of which is designed in a manner that it is intended to impose a new tax and after the closure of compliance window it will become a much harsher (in terms of) provision of both penalty and prosecution."
"A number of countries around the world already ask for voluntary disclosure on foreign bank accounts so this is not entirely a new concept. What is new is perhaps the quantum of penalties and action contemplated for false disclosures or violations of the proposed legislation," PwC India Leader- Forensics Dinesh Anand said.
The key will actually be on how the government will enforce this and what sort of machinery is put into place around it, he said.
"... The government will need to have an effective financial surveillance system and systematically collect and mine data around transactions with an overseas footprint. Enforcement will require extensive international collaboration and will continually require information from foreign jurisdictions.
"The government will thus need to work with other countries and their regulators issues to make sure that information on Indian tax payers is available and shared in a timely manner," Anand said.
