Those availing the one-time 'compliance window' would be required to pay a tax of 30 per cent and a penalty of a similar amount.
NEW DELHI: Those with undeclared overseas assets or income will have a three-month window to come clean beginning July 1 and a further three months to deposit the appropriate tax and penalty.
The government on Wednesday announced details of a compliance window provided under the stringent law seeking to curb black money passed by Parliament in the budget session.
"The central government has notified the 30th day of September, 2015, as the date on or before which a person may make a declaration in respect of an undisclosed asset located outside India..." the finance ministry said in a statement.
The last date for depositing tax is December 31, 2015. A dedicated cell will be set up in Delhi to accept declarations under the compliance window while another could be set up subsequently in Mumbai if the volume of declarations is considerable. All claims will be processed by these cells rather than assessing officers all over the country to ensure there is no harassment of those coming clean on undisclosed foreign wealth.
The cell will be manned by the officials of the income tax department with a record of integrity and will work under direct oversight of Central Board of Direct Taxes. Revenue secretary Shaktikanta Das told ETthat the government has built in safeguards to address concerns of harassment of taxpayers.
Those with unaccounted assets or funds outside will have to pay 30% tax and another 30% as penalty. In return, the government will not prosecute those coming clean under the Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. Under the law, beginning April 1, 2016 all 'residents', as defined under the income tax act, will have to declare foreign assets and income in their tax returns.
The law provides for imprisonment, which could be up 10 years, for those caught with undeclared overseas assets or income once the compliance window closes. In addition, the violator will have to pay tax of 30% and a penalty of 90%, effectively losing all of the undeclared wealth, if caught.
"Stringent penalties and prosecution, including rigorous imprisonment up to 10 years and penalty equal to three times of the tax have been prescribed for violation," the statement said.
The government has no estimate of the possible inflows under the compliance scheme, but tax experts ET spoke to say that they have received queries about the new law.
The government has maintained that the motive of the law is not to generate revenue through a one time compliance window but to deter future tax violation. There is no universally accepted estimate of the quantum of black money stashed away by Indian citizens.
At the end of 2014 Swiss banks were reported to have a liability of Rs 14,100 crore by way of deposits from Indians, up from Rs 8,547 crore a year ago. It is not clear how much of this is black money. Indians can legally hold foreign accounts following procedures laid down by the Reserve Bank of India. Global Financial Integrity, an international NGO, estimates an average outflow of $44 billion from India every year between 2003 and 2012.
The law allows the tax authorities to go back sixteen years in the quest for illicit foreign wealth. The government feels it will be difficult to hide money in foreign jurisdiction once a global agreement on sharing of financial information kicks in from 2017. The agreement, so far signed by over 90 countries, provides for automatic exchange of information.