Persons with hidden overseas wealth will have time till September 30 to come clean on it and another three months (till December 31, 2015) to pay 60% tax, including penalty, on such previously unreported wealth under a compliance window and escape rigorous imprisonment.
A finance ministry statement said in New Delhi that the time period for reporting such hidden wealth is notified under the the recently enacted Undisclosed Foreign Income and Assets (Imposition of Tax) Act, known as the black money law. If the department comes to know of hidden overseas wealth of individuals and entities that are not not offered for tax either as per normal assessment or under the compliance window, the penalty provisions under the black money law would be invoked. The compliance period offers a chance to avoid 120% penalty and rigorous imprisonment.
“Stringent penalties and prosecution, including rigorous imprisonment up to ten years and penalty equal to three times of the tax have been prescribed for violation,” said the statement. It said that the last date by which a person must pay the tax and penalty (60% of the value of the income and assets) in respect of the undisclosed foreign assets so declared shall be December 31, 2015.
Under the hugely successful Voluntary Disclosure of Income Scheme of 1998, the tax department had received declarations of unaccounted wealth of more than R7,000 crore.
Sources said that once hidden wealth is declared and 60% tax and penalty is paid on it, no further question would be asked. The idea is to reassure potential subscribers that the compliance window was not a trap but a safe exit route from the liabilities of past offence. The responsibility to receive applications would be with an officer not below the rank of a commissioner.
However, the protection from further questions and scrutiny would be limited to the amount of foreign income and assets disclosed during the compliance window. If the tax department comes to know through its information exchange agreements with other countries about any part of wealth that has not been covered by the disclosure made under the compliance window, that evasion could expose the person to the penalty provisions in the black money law, explained an official.