Holding out an olive branch, the government today said persons using special window to declare assets abroad will be given immunity from prosecution under FEMA, Prevention of Money Laundering Act and four other laws.
Also, persons not being informed of prior information with government on their assets abroad will be dealt under the Income Tax Act and not under the stringent Black Money law.
The Frequently Asked Questions (FAQs) issued by Finance Ministry said the 90-day compliance window till September 30 provided to foreign asset holders to come clean will, however, not guarantee immunity for wealth generated from corruption.
The window will not be available to those against whom notices have been issued on or before June 30, searches carried out or information received from foreign states.
The Finance Ministry said if an NRI acquires a property abroad using the income accrued or received in India without paying tax, then the asset would be treated as undisclosed foreign asset.
On foreign bank accounts, the FAQ said the taxable value would be the sum of all deposits made in the account since its opening and “not on the balance as on date”.
Non-disclosure of assets even if acquired from taxed and legitimate income, will attract a penalty of Rs 10 lakh.
However, any asset acquired out of income not chargeable to tax in India will not be defined as undisclosed asset.
In a breather to students, the Finance Ministry said foreign bank accounts having less than Rs 5 lakh deposit at any time during previous year would not attract any penalty.
However, all foreign assets have to be necessarily disclosed even if their fair market value is nil.
With regard to applicability of the capital gains tax on foreign assets declared by assessee, the Ministry said that “the declarant will be liable for capital gains under the Income-Tax Act on sale of such asset in future”.
The clause, tax experts say, will leave almost nothing with the assessee who would have paid 60 per cent of the fair market value of the property under the compliance window and would again pay capital gains tax when property is sold.
Also, any asset bought but disposed of before the date of declaration under the compliance window will have to be disclosed, said the FAQ, which came in the form a Central Board of Direct Taxes (CBDT) circular.
On the provision of the compliance rules that bar persons against whom the government has prior information from making disclosures, it said such declarations would be dealt with under I-T Act and not under the stringent Black Money law.
This concession will be available only to persons who had not received any intimation from the tax department having prior information about their foreign assets.
On government having any prior information, persons making declarations will be intimated by October 31, a month after the closure of the compliance window on September 30.
In case they do not receive any such information, they will have to pay 30 per cent tax and an equivalent amount of penalty by December 31.
The Disclosures made, the FAQs said, will enjoy “immunity from prosecution under the five Acts viz. the Income-Tax Act, Wealth Tax Act, FEMA, Companies Act and Customs Act.”
It, however, does not provide immunity from prosecution under ‘any other Act’.
The offence of wilful attempt to evade tax will also not be an offence under the Prevention of Money Laundering Act (PMLA), it added.
On whether a declaration can be made of undisclosed assets which have been assessed to tax and the case is pending before an Appellate Authority, the FAQ said, “The declarant is not entitled to re-open any assessment or reassessment made under the I-T Act. Therefore, he is not entitled to avail the tax compliance in respect of those assets.
“However, he can voluntarily declare other undisclosed foreign assets which have been acquired or made from income not disclosed and consequently not assessed under I-T Act.”
As regards inherited house property overseas, the FAQ said “the declaration has to be made by the person who inherited the property in the capacity of legal representative of his father. The fair market value of the property in his case shall be higher of its cost of acquisition and the sale price…,” it said.