Crackdown on black money: Absconders won't have a passport to evade taxmen

NEW DELHI: You can run but you can’t hide. Companies or individuals looking to shed their Indian ‘resident’ status in a hurry to avoid running afoul of the stringent new black money law will find the exercise futile.

Tax authorities will be able to initiate action against those having undeclared overseas assets even after a change in residency if these were held while being an Indian resident.“If the overseas asset was acquired and held as a resident and not disclosed, then action can be taken even if there is a change in residency status subsequently,” said a government official.

Under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, which came into effect on April 1, all ‘resident’ Indians have to declare foreign assets to tax authorities. There have been reports of individuals with foreign assets gaining residency in Dubai and Singapore to get out of the law’s reach. Tax experts said they are getting queries on how to deal with the law.

An individual is a resident if present in India for 182 days or more during a particular financial year or is in the country for 60 days in the relevant financial year along with 365 days or more during the preceding four financial years.

A company is resident if it’s a local venture or control and management are wholly based in the country. The new black money law has any change in residence covered and that is why a compliance window has been proposed, a tax official said. “Assets discovered at a later date when an assessee has changed his or her residency don’t alter his situation before the law, which is that his asset was part of his income when he was a resident and not disclosed to tax authorities,” the official said. Sanjay Sanghvi, partner at law firm Khaitan & Co, agreed that such a change wouldn’t work.

“Merely changing residency to a foreign country may not help since the offence relates to a period when the person concerned was a resident of India,” he said. “Proceedings can still (be initiated) against him and his properties in India, if any, carry risk of attachment.”

The law, part of the Narendra Modi government’s crackdown on black money, provides for a compliance window. All those who have foreign assets can pay 30% tax and 30% penalty to avoid prosecution.

After the window closes, tax authorities will be able to initiate action under the new law on the basis of information from other jurisdictions. India has begun to receive information from many tax havens on assets held by Indians.

Undisclosed foreign income or assets will face a tax of 30% plus 90% penalty besides prosecution.