New Delhi : The tax department will not ask for the source of funds deposited in banks from November 10 — post demonetisation of high value notes, if the entire income is declared and 50 per cent taxes paid on it, Revenue Secretary Hasmukh Adhia said on Monday, reports PTI. The disclosures will enjoy immunity from Wealth Tax, civil and other taxation laws but there will be no immunity from FEMA, PMLA, Narcotics and black money law, he said. Nearly three weeks after Prime Minister Narendra Modi announced junking high denomination currency notes, Finance Minister Arun Jaitley has introduced a bill to amend the Income Tax law to provide for a 30 per cent tax and a 33 per cent surcharge on such tax plus a penalty of 10 per cent for black money that is deposited in banks and declared.
In case the undisclosed income is detected later, a total tax and penalty of up to 85 per cent can be levied. “The deterrent provisions were necessary so that people have the fear of hoarding black money,” Adhia said. The disclosures made in the Pradhan Mantri Garib Kalyan Yojana (PMGKY), that attracts 50 per cent tax, “will ensure that no questions will be asked about the source of fund. It would ensure immunity from Wealth Tax, civil laws and other taxation laws. But there is no immunity from FEMA, PMLA, Narcotics, and black money act”, he said.
Deposits which have already been made from November 10 will be covered under PMGKY. “Last date we will notify after the bill is passed but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016,” he said.
The current provisions of penalty on under-reporting of income at 50 per cent of the tax, and misreporting (200 per cent of tax) will remain and no changes are being made to them. Under-reporting/misreporting income is normally difference between returned income and assessed income. The Taxation Laws (Second Amendment) Bill, 2016 proposes to amend Section 115BBE of the Income Tax Act to provide for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.
Against current provision of 30 per cent flat tax rate plus surcharge and cesss, a steep 60 per cent tax will be levied on such income together with 25 per cent surcharge of tax (15 per cent of such income). So total incidence of tax will be 75 per cent with no expense, deductions or set-off allowed. Also, the assessing officer can levy an additional 10 per cent penalty, taking the total tax incidence to 85 per cent. The current provisions for penalty in cases of search and seizure are proposed to be amended to provide for a penalty of 30 per cent of income if it is admitted, returns filed and taxes paid. In all other cases, 60 per cent will be the penalty.