These are the only 4 tax options if you hold black money

Here is a detailed analysis of how much tax and penalty a person holding black money would have to pay in case of each of the four options before him/her after the proposed amendments to the Income Tax Act become law. Analysis is by assurance and tax advisory firm E&Y. The analysis also spells out under which option immunity from other laws would be available and where it would not be.

Scenario where income pertains to AY 2017-18 or earlier years

1. Taxpayer, who has not reported cash deposit as income, is able to satisfactorily explain nature and source of cash deposit
No consequences

2. Taxpayer is unable to explain nature and source of cash or deposits
i) Owns up income in form of cash or deposit in ROI[15] to be filed for tax year 2016-17, pays tax before 31 March 2017 but does not opt for Scheme. (Income may pertain to earlier year/s)

Tax impact


ii) Makes a declaration in respect of cash or deposits under Pradhan Mantri Garib Kalyan Yojana and pays tax, surcharge, penalty and makes deposit of at least 25% of undisclosed income by specified date. (Income may pertain to earlier year/s)

Tax impact

. 25% of undisclosed income blocked in interest-free deposit for four years
. Immunity from reopening of past income/wealth tax assessments
. Immunity from certain other laws barring exceptions
iii) Neither owns up income in ROI nor opts for declaration under Scheme and addition is made by Tax Authority without detection in search

Tax impact
. In addition, Tax Authority can also levy penalty @ 10% of tax

iv) Undisclosed income is detected in search conducted after Presidential assent to Bill and

a) Taxpayer owns up income in the course of search, substantiates manner in which income was derived and pays up tax (with interest, if any) and includes income in ROI

Tax impact

. In addition, Tax Authority can also levy penalty @ 30% of undisclosed income

b) In any other case

Tax impact

. In addition, Tax Authority can also levy penalty @ 60% of undisclosed income

Notes:
1. Interest may be levied separately if there is any default in payment of tax including advance tax in all scenarios except at Sr. No. 2(ii)
2. Risk of prosecution also exists in all scenarios except at Sr. No. 1 and 2(ii).

Snapshot of comparative tax consequences of voluntary offer of undisclosed income under Scheme vs. as part of ROI



Also Read: Proposed black money tax changes decoded