Local Goa News

Monday, November 28, 2016

Another window for black money holders as govt looks to tweak Income-Tax law

Those having sleepless nights because of the old Rs 500 and Rs 1,000 notes lying with them have now been given a window by the government, which placed a Bill in the Lok Sabha on Monday to tweak the provisions of the Income-Tax (I-T) Act.

This legislation has an income disclosure scheme, under which black money holders can deposit the banned high-value currency notes in their accounts and declare them to the government. Once they do that, they can bring a part of that cash into the system after paying various levies.

DNA simplifies the government move.
What does the new black money scheme mean?
The new scheme – Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) – is part of the Taxation Laws (Second Amendment) Bill, 2016 introduced in the Parliament on Monday. It attempts to plug loopholes in the I-T Act, 1961, which is being misused to conceal black money.

What does it propose?
Make penalty provisions more stringent and amend Section 271AAB for a two-tier tax penalty regime of 30 per cent and 60 per cent after presidential assent, which is expected soon.

What does it mean to black money holders?
They will get a window till December 30 for depositing unaccounted money in banks and come clean about it by paying higher tax, penalty and a surcharge of 49.9 per cent. The can deposit 25 per cent of unexplained income in a zero-rated government scheme with a four-year lock-in period.

Is the 33 per cent surcharge levied on penalty?
It is levied on the tax amount. For example, at 30 per cent, the tax paid on an undisclosed income of Rs 100 is Rs 30. The surcharge would be charged on Rs 30 at 33%, which comes to Rs 9.9. The penalty proposed is 10 per cent, which would be Rs 10. So, tax, penalty and surcharge on the unexplained income of Rs 100 would be Rs 49.9 or 49.9%.

How much will they have to pay in total?
Besides tax, penalty and surcharge, those who declare black money will also have to park 25% of that in the PMGKY scheme for four years without earning any interest. This means Rs 25 of the Rs 100 will fall there. So, the total amount to be paid to the government would be Rs 75 on undisclosed income of Rs 100.

How much money will be at their disposal?
Those declaring hidden wealth will be able to bring back Rs 25 of the unexplained Rs 100 back into circulation and into the formal sector. They can withdraw another Rs 25 after four years.

What if they fail to make use of this window?
Then they can file tax returns at the end of the financial year and declare unknown income. But they will have to pay 60 per cent tax, 25 per cent surcharge and 10 per cent penalty. This means, they will have to pay Rs 75 (tax, penalty and surcharge) on Rs 100 against Rs 50 during the window period.

If they do not disclose income while filing returns, the 75 per cent levy would become 85 per cent. In case of misreporting or under-reporting or any other wrongdoing, they would be governed by the current provisions under Section 270A of a levy of 50 per cent (under-reporting) and up to 200 per cent (misreporting)

DNA India News

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