Amid the vociferous furore over Vyapam what has gone unnoticed is the new overseas black money law. New problems and questions keep on cropping up with this law. Loopholes need to be plugged fast for the law to become effective. It is a common belief in our country that draconian laws will solve our economic, political or even ethical problems. That why legislations like FERA, COFEPOSA, various anti-terrorism or preventive detention laws etc. The Undisclosed Foreign Income and Assets (Imposition of Tax) act 2015. It applies to Indian residents and seeks to replace the Income Tax act of 1961 for the taxation of foreign income. It penalize the concealment of foreign income and provide for criminal liability for attempting to evade tax on foreign assets.
The tax rate of 30% would apply to an undisclosed asset for the previous assessment year. No deduction and exceptions will be provided for carry forwarded year. On a positive note a one-time compliance opportunity is given to a person having an undisclosed foreign asset, they can declare it to the tax authority and have to pay 100% penalty. The interesting aspect of the Act is that it involves a high penalty of 300% plus 30% tax.It also provides for a steep and rigorous imprisonment up to 10 years.These harsh provisions of the bill are the primary reason of concern for genuine tax payers and residents working in foreign countries as they are not clear about what comes in the purview of the act.They generally invest in pension and social security schemes there. Any failure of a declaration will cause prosecution under the act.The act will help to curb generation of black money in future. It will also hopefully help to improve the GDP-TAX ratio due to improved tax revenue.The bill also provides for the attachment of domestic property of those on the wrong end of the foreign assets. Critics have pointed out that the act can mark the return of the era of the tax man wielding disproportionate power.
Furthermore, It does not have any provision regarding illegal assets on Indian soil.By enacting a clear cut black money law, India has make it very clear that tax evasion and illegal money laundering will not be tolerated further. Here’s hoping that the law is used in an effective way without harassing the taxpayers. A law to curb domestic black money and <g data-gr-id="43">benaami</g> properties is also required. The fight to bring back black money will be a long drawn battle. This law has auspiciously sounded the bugle of that fight.