Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015

Context

Alleging detection of undeclared offshore assets and investments, the Mumbai unit of the Income Tax Investigation Wing passed a final order March 2022 against Anil Ambani, Chairman of the Reliance (ADA) Group, under The 2015  Black Money Act (BMA)

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

• Black money in the form of undisclosed foreign income and assets comes under the purview of this law. The UFIA Act gives an opportunity to the black income holders to reveal black money and pay a tax within a compliance window time. After this time, black income holders will come under severe penal and prosecution measures prescribed under the law.
• ‘Undisclosed foreign income and asset’ is defined as the total amount of undisclosed income of an assesses from a source located outside India and the value of an undisclosed asset located outside India.
• Persons who use this compliance window will be permitted to file a declaration before a tax authority, and pay a tax rate of 30% and a penalty at the rate of 100% (of the tax); implying a total tax of 60%. No exemption, deduction or set off of any carried forward losses (as provided under the IT Act) would apply.
• The total undisclosed foreign income and asset of an individual would include:

(i) income, from a source located outside India, which has not been disclosed in the tax returns filed;

(ii) income, from a source outside India, for which no tax returns have been filed; and

(iii) value of an undisclosed asset, located outside India.

• Not furnishing income tax returns for foreign income and assets or providing misleading information for such foreign income and assets attracts a penalty of Rs 10 lakh under the new legislation. Criminal punishment for such tax evasion practices could attract rigorous imprisonment from three to 10 years and a discretionary fine.
• Administering authority-The Central Board of Direct Taxes and the existing hierarchy of tax authorities under the provisions of the Income Tax Act, including the appeals machinery prescribed thereunder, have been tasked with implementation of the new legislation
• The Act will be applicable to a person:

(i) who is a tax resident of India as per the tests of the Income Tax Act, 1961 (ITA);

(ii) who is not a person who is a ‘resident but not ordinarily resident’; and

(iii) by whom tax is payable under the UFIA Bill on undisclosed foreign income and assets or any other sum of money.