Demonetisation Saga - Govt proposes to amend I-T Act to introduce one more CESS; 75% tax on undisclosed income & 10% penalty on detection of black money
By TIOL News Service
NEW DELHI, NOV 28, 2016: IN place to giving a new lease of life to the recently-expired IDS, 2016, the Modi Govt opted for a tougher route of introducing a new Bill in the Lok Sabha to amend the I-T Act in order to deal with the growing graph of illegal deposits along with huge legal deposits in bank accounts. Since experts are of the view that the extant I-T Act does not have the necesary statutory muscles to punish tax evaders or black money horders, the Union Cabinet last week passed the proposal to amend the I-T Act and also obtained the Presidential approval for the same.
Amidst the rising decibels of protest in the House, the Govt tabled the amendment which has proposed that in place of black money hoarders paying hefty commission to agents for conversion, they can pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.
In this backdrop, an alternative Scheme namely, 'Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess' @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.
An overview of the amendments proposed in the Bill are placed below;
Overview of Amendments Proposed
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PARTICULARS
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EXISTING PROVISIONS
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PROPOSED PROVISIONS
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General provision for penalty
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PENALTY (Section 270A)
Under-reporting - @50% of tax
Misreporting - @200% of tax
(Under-reporting/ Misreporting income is normally difference between returned income and assessed income)
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No changes proposed
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Provisions for taxation & penalty of unexplained credit, investment, cash and other assets
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TAX (Section 115BBE)
Flat rate of tax @30% + surcharge + cess
(No expense, deductions, set-off is allowed)
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TAX (Section 115BBE)
Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx.
(No expense, deductions, set-off is allowed)
PENALTY (Section 271AAC)
If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.
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Penalty for search seizure cases
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Penalty (271AAB)
(i) 10% of income, if admitted, returned and taxes are paid
(ii) 20% of income, if not admitted but returned and taxes are paid
(iii) 60% of income in any other case
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Penalty (271AAB)
(i) 30% of income, if admitted, returned and taxes are paid
(ii) 60% of income in any other case
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Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY)
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New Taxation and Investment Regime
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Undisclosed income in the form of cash & bank deposit can be declared:
(A) Tax, Surcharge, Penalty payable
Tax @30% of income declared
Surcharge @33% of tax
Penalty @10% of income declared
Total @50% of income (approx.)
(B) Deposit
25% of declared income to be deposited in interest
free Deposit Scheme for four years.
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(See Full Text Taxation Laws (Second Amendment) Bill, 2016)
