Holding out an olive branch, the government today said persons using special window to declare assets abroad will be given immunity from prosecution under FEMA, Prevention of Money Laundering Act and four other laws.
Also, persons not being informed of prior information with government on their assets abroad will be dealt under the Income Tax Act and not under the stringent Black Money law.
The Frequently Asked Questions (FAQs) issued by Finance Ministry said the 90-day compliance window till September 30 provided to foreign asset holders to come clean will, however, not guarantee immunity for wealth generated from corruption.
The window will not be available to those against whom notices have been issued on or before June 30, searches carried out or information received from foreign states.
The Finance Ministry said if an NRI acquires a property abroad using the income accrued or received in India without paying tax, then the asset would be treated as undisclosed foreign asset.
On foreign bank accounts, the FAQ said the taxable value would be the sum of all deposits made in the account since its opening and “not on the balance as on date”.
Non-disclosure of assets even if acquired from taxed and legitimate income, will attract a penalty of Rs 10 lakh.
However, any asset acquired out of income not chargeable to tax in India will not be defined as undisclosed asset.
In a breather to students, the Finance Ministry said foreign bank accounts having less than Rs 5 lakh deposit at any time during previous year would not attract any penalty.
However, all foreign assets have to be necessarily disclosed even if their fair market value is nil.
With regard to applicability of the capital gains tax on foreign assets declared by assessee, the Ministry said that “the declarant will be liable for capital gains under the Income-Tax Act on sale of such asset in future”.
The clause, tax experts say, will leave almost nothing with the assessee who would have paid 60 per cent of the fair market value of the property under the compliance window and would again pay capital gains tax when property is sold.
Also, any asset bought but disposed of before the date of declaration under the compliance window will have to be disclosed, said the FAQ, which came in the form a Central Board of Direct Taxes (CBDT) circular.
On the provision of the compliance rules that bar persons against whom the government has prior information from making disclosures, it said such declarations would be dealt with under I-T Act and not under the stringent Black Money law.
This concession will be available only to persons who had not received any intimation from the tax department having prior information about their foreign assets.
On government having any prior information, persons making declarations will be intimated by October 31, a month after the closure of the compliance window on September 30.
In case they do not receive any such information, they will have to pay 30 per cent tax and an equivalent amount of penalty by December 31.
The Disclosures made, the FAQs said, will enjoy “immunity from prosecution under the five Acts viz. the Income-Tax Act, Wealth Tax Act, FEMA, Companies Act and Customs Act.” It, however, does not provide immunity from prosecution under ‘any other Act’.
The offence of wilful attempt to evade tax will also not be an offence under the Prevention of Money Laundering Act (PMLA), it added.
On whether a declaration can be made of undisclosed assets which have been assessed to tax and the case is pending before an Appellate Authority, the FAQ said, “The declarant is not entitled to re-open any assessment or reassessment made under the I-T Act. Therefore, he is not entitled to avail the tax compliance in respect of those assets.
“However, he can voluntarily declare other undisclosed foreign assets which have been acquired or made from income not disclosed and consequently not assessed under I-T Act.” As regards inherited house property overseas, the FAQ said “the declaration has to be made by the person who inherited the property in the capacity of legal representative of his father. The fair market value of the property in his case shall be higher of its cost of acquisition and the sale price...,” it said.
The FAQ made it clear that after the declaration is made, the Principal Commissioner/Commissioner would enquire whether any information has been received by the competent authority in respect of the assets declared.
“Apart from this no other enquiry will be conducted by him at the time of declaration.”
The ministry said that “beneficial owner” of the assets would be required to declare the assets. For the purpose of the Act, the “beneficial owner” would mean an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit.
With regard to the assets about which the government has prior information, the ministry said, “The person cannot make a declaration of an undisclosed foreign asset where the central government has received an information in respect of such asset under the DTAA.
“The person is entitled for voluntary declaration in respect of other undisclosed foreign assets for which no information has been received.”
On how the person declaring overseas assets will know whether the government has prior information, the FAQs clarified, “after the person has filed a declaration, which is to be filed latest by September 30, 2015, he will be issued intimation by the Principal Commissioner/Commissioner by October 31, 2015, whether any information has been received by the Government and consequently whether he is eligible to make the payment on the declaration made.
“If no information has been received up to June 30, 2015 by the government in respect of such assets the person will be allowed a time up to December 31, 2015 for payment of tax and penalty in respect of the declared asset... In respect of the ineligible assets provisions of the Income-tax Act shall apply.”
On consequences of non-declaration of assets acquired prior to the commencement of the Act, the ministry said, “Such assets shall be deemed to have been acquired in the year in which it comes to the notice of the Assessing Officer and the provisions of the Act shall apply accordingly.” It further said the government will start receiving information through Automatic Exchange of Information (AEOI) route under FATCA from USA later 2015 and will act accordingly.
In case of a firm, the FAQ said the declaration with regard to the undisclosed assets will have to be filed by the firm and not the partners. The partners, however, can file declaration in respect of an undisclosed asset held by him.
In case of a company declaring undisclosed assets, it said the directors will not be liable for any offence under the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act.
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