New black money disclosure scheme post demonetisation: All you need to know

Zee Media Bureau

Providing yet another opportunity to black money holders to legalise their wealth, government has proposed to tax at 50 percent the unaccounted demonetised cash that is disclosed voluntarily till December 30, after which a steep up to 85 percent tax and penalty will be levied on undisclosed wealth that is discovered by authorities.

The Taxation Laws (Second Amendment) Bill, 2016, introduced on Monday in the Lok Sabha by Finance Minister Arun Jaitley, nearly three weeks after Prime Minister Narendra Modi banned high denomination currency notes, also provides for immunity from being questioned on the source of funds.

It amends the Income Tax Act to also provide for black money declarants having to mandatorily park 25 percent of that wealth in zero-interest, four-year-no-withdrawal scheme.

Below are the key provisions proposed to the Bill:

PARTICULARS	EXISTING PROVISIONS	PROPOSED PROVISIONS
General provision for penalty	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)	No changes proposed
Provisions for taxation & penalty of unexplained credit, investment, cash and other assets	TAX  (Section 115BBE) Flat rate of tax @30% + surcharge + cess (No expense, deductions, set-off is allowed)	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%.
Penalty for search  seizure cases	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	Penalty (271AAB) (i) 30% of income, if admitted, returned and taxes are paid (ii) 60% of income in any other case
Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)	New Taxation and Investment Regime	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.