New Delhi: The government will give immunity from prosecution under FEMA, Prevention of Money Laundering Act and four other laws to persons declaring undisclosed foreign assets under the compliance window of the new Black Money Act. The one-time 90-day compliance window being provided to foreign asset holders to come clean will, however, not guarantee immunity for wealth generated from corruption, according to FAQs on Black Money law issued by the Finance Ministry today.
On the provision of the compliance rules that bars persons against whom the government has prior information for making disclosures, the Finance Ministry said declarations by such persons will be dealt under the Income Tax Act and not under the stringent Black Money law.
This concession will be available only to persons who had not received any intimation from the tax department having prior information about their foreign assets. On whether government has any prior information, persons making declarations will be intimated by October 31, a month after the closure of 90-day compliance window on September 30.
In case they do not receive any such information, they will have to pay 30 per cent tax and an equivalent amount of penalty by December 31. Discl sures made, the FAQs said, will enjoy “immunity from prosecution under the five Acts viz. the Income-tax Act, Wealth Tax Act, FEMA, Companies Act and Customs Act.” It, however, does not provide immunity from prosecution under ‘any other Act’.
Giving example, the FAQ said, if the undisclosed asset has been acquired out of the proceeds of sale of protected animals the person will not be eligible for immunity under the Wildlife (Protection) Act, 1972. The offence of willful attempt to evade tax will also not be an offence under the Prevention of Money Laundering Act (PMLA), it added.
The Finance Ministry clarified that persons can take advantage of the compliance window to declare those foreign assets for which no notices have been served by the tax authorities till June 30, 2015 or about which the government has no prior information.
On whether a declaration can be made of undisclosed assets which have been assessed to tax and the case is pending before an Appellate Authority, the Ministry said, “The declarant is not entitled to re-open any assessment or reassessment made under the I-T Act. Therefore, he is not entitled to avail the tax compliance in respect of those assets.
“However, he can voluntarily declare other undisclosed foreign assets which have been acquired or made from income not disclosed and consequently not assessed under I-T Act.” With regard to applicability of the capital gains tax on foreign assets declared by assessee, the Ministry said that “the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future”.
On taxation of money in foreign bank account, it said the fair market value is the sum of all the deposits made in the account computed in accordance with the rules. “Therefore, tax and penalty needs to be paid on such fair market value and not on the balance as on date,” it said.
As regards inherited house property overseas, the FAQ said “the declaration has to be made by the person who inherited the property in the capacity of legal representative of his father. The fair market value of the property in his case shall be higher of its cost of acquisition and the sale price…,” it said.
In case of a firm, the FAQs said the declaration with regard to the undisclosed assets will have to be filed by the firm and not the partners. The partners, however, can file declaration in respect of an undisclosed asset held by him.
In case of a company declaring undisclosed assets, it said, the directors will not be liable for any offence under the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act.
