New Delhi: Finance Minister Arun Jaitley on Monday piloted a Taxation Laws (second amendment) Bill in the Lok Sabha to give effect to the government’s decision on those surrendering more than Rs 2.5 lakh to banks in the scrapped notes of Rs 500 and Rs 1,000. It will leave with the depositor only one-fourth of the money so deposited, while 50% will be taken away by the income-tax department and remaining 25% will be locked in as “Pradhan Mantri Garib Kalyan Deposit” for four years for investment in the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood. The levy of 50% is worked out by imposing 30% as the income tax in the highest slab, surcharge of 33% of tax plus a penalty of 10% on the amount declared.
The harshest provision proposed in the Bill is to charge 85% as tax and penalty in case of the unexplained cash, credit, investment and other assets. The present law levies on such money a flat rate of tax @30% plus surcharge plus cess. The proposed amendment is to levy a flat rate of tax @60% plus surcharge @25% of the tax.
The total incidence of tax comes to 75% of the total amount. The Bill further envisages that if the assessing officer determines the income referred to in Section 115BBE, an additional penalty of 10% will be levied in addition to the 75% tax, including surcharge. The Bill also seeks to amend some other income-tax provisions. They include penalty in search-seizure cases increased from 10% to 30% of income if admitted and tax paid, and from 20% of income if not admitted but tax paid to 60% of income in other cases.
Jaitley, who introduced the Bill in the Lok Sabha, said the existing provisions of the Income-tax Act can possibly be used to conceal black money and hence the Bill to ensure that the defaulting assessees are subjected to tax at a higher rate with stringent penalty provisions. He said the Bill will also prevent the people to find illegal ways to convert their black money into black again in the wake of the demonetisation. Such people will get an opportunity to pay taxes with heavy penalty to let them come clean so that not only the government gets additional revenue for welfare of the poor but the remaining part of the declared income legitimately comes into the formal economy. Jaitley said it was in this backdrop that an alternative scheme christened as “Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016” has been proposed in the Bill. Those depositing heavy amount will have to pay 33% of tax as a surcharge to be called “Pradhan Mantri Garib Kalyan Cess” and put another 25% of the declared amount in the “Pradhan Mantri Garib Kalyan Deposit Scheme for four years.
THE NEW TAX LIFELINE
The govt has proposed that people can declare their black money and pay almost 50 percent of income as tax & penalty.
A steep tax of up to 85 per cent and penalty will be levied on undisclosed wealth that is discovered by authorities
A disclosure scheme called the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016 allows people to deposit money till April 2016 by paying 50 per cent of the total amount – 30 per cent as tax, 10 per cent as penalty and 33 per cent of the taxed amount — that is 10 per cent — as Garib Kalyan Cess.
Taxes and levies will equal nearly 50 per cent of the deposit. 25 per cent of the money that remains after taxes will be available to the account holder.
Apart from 50 percent tax and penalty, one will have to deposit 25 pc of declared income in an interest-free Deposit Scheme for four years.
IBA DIKTAT TO BANKS
With the last date for paying the first installment of due taxes and penalty under the one-time black money window
IDS nearing, Indian Banks’ Association (IBA) has asked banks to accept the old Rs 500 notes from the declarants under the scheme and not seek the source of funds from them. They have also been asked to ensure that such payments were accepted from the declarants without any hassle.