Lok Sabha passes bill to deal with black money stashed abroad

NEW DELHI: The Lok Sabha on Monday passed a stringent law to unearth black money stashed overseas, putting in strong deterrent for those who do not come clean in a one-time window being provided under the law and declared unaccounted foreign wealth.

"All those who keep money outside — time is running out for them as the world is moving to an automatic information exchange and soon, when that is available, they will be penalised for their action," finance minister Arun Jaitley said, replying to the debate on the Black Money (Undisclosed Income and Foreign Assets) Imposition of New Tax Bill on Monday. The nomenclature of the bill was changed to specifically mention black money.

India and other G-20 members have committed to a global framework on automatic information exchange. It will also receive information on assets held by its citizens from the US under FATCA.


The bill was passed by voice vote in the lower house. It will go to the Rajya Sabha, which will debate and return the bill since it has been termed a money bill. If it does not return the bill in 15 days, it would be deemed to be passed. The government has had difficulty in getting legislation passed in the Rajya Sabha, where it is outnumbered by the opposition. The detailed rules are likely to provide a 60-day window for offenders to come clean.

Those declaring unaccounted income or assets will pay a flat 30% tax and a similar penalty in return for not being prosecuted. Jaitley said the road map on dealing with black money was very clear. While the government will cooperate with the international community to get information, it will also put in place a domestic law that would act as a deterrent. He said the government is also trying to squeeze out black money being parked in property and gold, without causing any shock.

He said the Prevention of Money Laundering Act was amended to help tax authorities pursue recovery through domestic assets as well in cases of those caught with overseas assets under the new black money law. The bill provides for the attachment of domestic property of those on the wrong end of the foreign assets law. The finance minister said the government would soon bring a law on Benami properties.

The law is part of the Narendra Modi-led NDA government’s crackdown on black money, which makes hiding wealth overseas a criminal offence attracting up to 10 years of rigorous imprisonment. Those abetting in stashing wealth overseas, including tax advisors, financial advisors, banks and financial institutions, will also face jail terms of up to seven years.

"With the finance minister indicating plans to amend the PMLA to include the concealment of foreign income as a predicate offence and the introduction of a new and more comprehensive Benami Transactions (Prohibition) Bill, the challenge on domestic black money should also be hopefully addressed soon," said KV Karthik, senior director at Deloitte India. Jaitley said the black money law did not offer any amnesty as this was a new tax. "Here we are imposing a fresh tax…if you miss the compliance window you will face prosecution," he said.

After the compliance window closes, undisclosed foreign income or assets will be taxed at 30%, besides a penalty of 90% under the new law. Willful attempts to evade tax in relation to foreign income or assets located outside India will attract rigorous imprisonment from three years to 10 years, besides a fine. Failure to furnish returns or inaccurate disclosures in respect of foreign assets and bank accounts or income will be punishable with rigorous imprisonment for six months to seven years, besides a fine of Rs 10 lakh.

Second and subsequent offences would be punishable with rigorous imprisonment for a term of 3-10 years with fines of Rs 25 lakh to Rs 1 crore. Beneficial owners or beneficiaries of an asset would also face stiff punishments and fines for non-disclosure. Jaitley said the government does not wish to go after trivial cases and the innocent would not be targeted. "…the big fish must not get away," Jaitley said, adding that students and professionals who have small amounts in foreign accounts would not be penalised. No action would be taken against those who have up to Rs 5 lakh in foreign bank accounts.