Black money bill put up in Lok Sabha; proposes 10 years jail for concealing foreign funds

NEW DELHI: India moved a step closer to a harsher regime for those hiding wealth overseas with the government introducing legislation in Parliament that makes such concealment a criminal offence, punishable by as much 10 years of rigorous imprisonment.

Tax advisors, financial advisors, banks or financial institutions caught aiding any Indian in stashing black money overseas will also face jail terms of up to seven years under the Undisclosed Foreign Income & Assets (Imposition of New Tax) Bill, which proposes a short compliance window for those having foreign assets to come clean.

The Bill needs to be passed by both Houses, approved by the President and notified before it becomes law.

“Recognising the limitations of the existing legislation, it is proposed to introduce a new legislation to deal with undisclosed assets and income stashed abroad,” said the statement on objects and reasons of the Bill. A more stringent law on black money had been proposed in Finance Minister Arun Jaitley’s February 28 Budget.
Undisclosed foreign income or assets will be taxed at a flat 30%, besides a 90% penalty under the proposed law.

The punishment for wilful attempts to evade tax in relation to foreign income or an asset located outside India will be rigorous imprisonment from three to 10 years besides a fine.

The failure to furnish a return or an inaccurate disclosure in respect of foreign assets and bank accounts or income will be punishable with rigorous imprisonment for a term of six months to seven years besides a fine of Rs 10 lakh. Second and subsequent offences will be punishable with rigorous imprisonment for a term of three to 10 years with a fine of Rs 25 lakh to Rs 1 crore.

“In prosecution proceedings, the wilful nature of the default shall be presumed and it shall be for the accused to prove the absence of the guilty state of mind,” read the legislation.

Beneficial owners or beneficiaries of an asset would have to make necessary disclosures and would also face stiff punishments and fines for non-disclosure.

The provision is aimed at the complex web of corporate structures or trusts formed in tax havens to avoid disclosures.

WIDE COVERAGE

“The scope and coverage of the proposed Bill is quite wide with stringent penal provisions to act as a deterrent,” said Vikas Vasal, partner, KPMG in India. “It is proposed that the provisions will also apply to beneficial owners and to the beneficiaries of such foreign assets as are covered under the Bill. Any person who derives any benefit from foreign assets would have to ensure that he is compliant with the provisions and that adequate disclosures have been made, to avoid any penal consequences."

The Bill proposes a one-time compliance window for the holders of black money abroad to declare their wealth, pay tax at the rate of 30% and an equal amount as penalty to escape prosecution later. Operationalisation of the window will be specified after the passage of the Bill.