Capital gains tax to be collected on sale of assets reported under black money law

By: | Published: July 8, 2015 12:50 AM

Ill-gotten foreign assets of tax evaders disclosed under the ongoing three-month amnesty period would attract not just 60% tax and penalty, but also capital gains tax when these assets are sold eventually.

Ill-gotten foreign assets of tax evaders disclosed under the ongoing three-month amnesty period would attract not just 60% tax and penalty, but also capital gains tax when these assets are sold eventually.

Clarifications issued by the Central Board of Direct taxes (CBDT) in the form of frequently asked questions (FAQs) on the black money law said that capital gains tax computed as per the Income Tax Act would apply when ill-gotten assets declared under the special black money compliance scheme are sold in the future.

Since the unaccounted foreign asset would be disclosed at its fair market value on the date of reporting, it would be deemed as the acquisition cost for calculating the capital gain when these assets are sold eventually.

Capital gain is the difference between the sale price and the cost of acquisition which in the case of assets declared under the special compliance window would be the reported fair market value. Any further appreciation in the value of the asset would attract capital gain tax. Also, the period of holding of such assets shall start from the date of declaration of such assets under Chapter VI of the Undisclosed Foreign Income and Asset Imposition of Tax Act, the board clarified. The black money compliance window could also be utilised for disclosing foreign assets which were acquired from fully explainable tax paid funds, but were not reported earlier in the tax return. The board said that section 43 of the Act prescribes a penalty of R10-lakh for not disclosing a foreign asset even if it is purchased through tax-paid funds and hence could be declared under the special compliance window.

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