By TIOL News Service

NEW DELHI, FEB 28, 2015: THE Finance Minister, Mr Arun Jaitley, has come down aggressively on the scourge of black money in India. He not only wants to curb the generation of black money but also wants to track it down and bring back the wealth stashed away in foreign lands, or even enable seizing an equivalent value in India. Aimed at putting the fear of the devil in potential offenders, Budget 2015 emphasises disclosures and penal punishments in a comprehensive new law on Black Money. Amendments are also proposed to the Income Tax Act, Foreign Exchange Management Act and the Prevention of Money-laundering Act to enable the administration of the new law.

BLACK MONEY LAW

The new law on Black Money provides for a new structure for the investigation and detection of black money parked abroad in foreign accounts or as undisclosed foreign assets on a priority basis.

It makes concealment of income and assets and evasion of tax on foreign assets a non-compoundable offence punishable with rigourous imprisonment up to 10 years in addition to levy of 300 per cent penalty. The offender will not be permitted to approach the Settlement Commission under the proposed law. Income from an undisclosed foreign asset will be taxable at the maximum marginal rate and any exemptions or deductions otherwise applicable would be disallowed.

FILING OF RETURN MANDATORY

The proposed law makes filing of return in respect of, even if there is no tax payable. The assessee is required to specify the date of opening of foreign account in the return of income. Non-filing of return or foreign asset mandatory filing of return with inadequate disclosures is punishable with rigorous imprisonment up to 7 years. Any entity, banks, financial institutions and individuals or even their abettors are liable for prosecution and penalty. Even third party reporting entities will be required to furnish information about foreign currency sales and cross border transactions. Provision is also being made to tackle splitting of reportable transactions.

PREDICATE OFFENCE

The proposed law also makes false declarations or concealing income or evasion of tax on foreign asset a predicate offence. It enables authorities to attach and confiscate unaccounted assets held abroad, launch prosecutions and seize and confiscate equivalent value situated in India. To enable this, required amendments are also proposed to the Prevention of Money Laundering Act (PMLA), 2002, and Foreign Exchange Management Act (FEMA).

The definition of ‘proceeds of crime’ under the PMLA is being amended to enable attachment and confiscation of equivalent asset in India. A special provision, section 37A, is proposed to be added to the Foreign Exchange Management Act, relating to assets held outside India in contravention of section 4.

The law proposes to put in place a new structure for domestic collection of information, which would include electronic filing of statements for seamless integration of data and effective enforcement. Both CBDT and CBEC will use technology to access information by sharing each other's database.

CURB DOMESTIC BLACK MONEY

The government has also announced measures to curb domestic black money, especially in real estate. It has proposed a new Benami Transactions (Prohibition) Bill, which will enable prosecution and confiscation of benami property. Various amendments to the Income Tax Act, are also proposed to be introduced in the current session of Parliament along with the law on Black Money.

I-T ACT AMENDMENT

Changes are also proposed to the Income Tax Act. Provisions of section 269SS and 269T are proposed to be amended for prohibiting cash transactions of Rs 20,000 and more in real estate. Penalties of equal amount will be imposed in case of contraventions. Quoting of PAN will be made mandatory for any purchase or sale of property exceeding Rs 1 lakh.