BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015
Those
assessee with any undeclared overseas income or assets will have a 3 month
window to come clean beginning on July
1, 2015 and a further 3 months to deposit the appropriate tax and
penalty till Dec 31, 2015 .
Ministry of Finance, Government of India has announced details of a compliance
window to curb black money. Central government has notified on 30th September, 2015 , as the date on or
before which a person can make a declaration in respect of an undisclosed asset
located outside India .
The last date for depositing tax is December
31, 2015 .
A dedicated cell will be set up in Delhi
to accept declarations under the compliance window while another could be set
up subsequently in Mumbai if the volume of declarations is considerable. All
claims will be processed by these cells rather than assessing officers all over
the country to ensure there is no harassment of those coming clean on
undisclosed foreign wealth.
The
cell will be manned by the officials of the income tax department with a record
of integrity and will work under direct oversight of Central Board of Direct
Taxes. The government has built in safeguards to address concerns of harassment
of taxpayers.
Those
with unaccounted assets or funds outside will have to pay 30% tax and another
30% as penalty. In return, the government will not prosecute those coming clean
under the Black Money (Undisclosed Foreign Income and Asset) and Imposition of
Tax Act, 2015.
Under
the law, beginning April 1, 2016
all 'residents', as defined under the Income Tax Act, will have to declare
foreign assets and income in their tax returns. The law provides for
imprisonment, which could be up 10 years, for those caught with undeclared
overseas assets or income once the compliance window closes. In addition, the
violator will have to pay tax of 30% and a penalty of 90%, effectively losing
all of the undeclared wealth, if caught.
"Stringent
penalties and prosecution, including rigorous imprisonment up to 10 years and
penalty equal to three times of the tax have been prescribed for violation.
The
law allows the tax authorities to go back sixteen years in the quest for
illicit foreign wealth. The government feels it will be difficult to hide money
in foreign jurisdiction once a global agreement on sharing of financial
information kicks in from 2017. The agreement, so far signed by over 90
countries, provides for automatic exchange of information.
However,
this is not to say that the tax evaders will not be prosecuted under other acts
such as the Prevention of Money Laundering Act (PMLA), if found guilty. The scheme
will not cover those having amounts equivalent to Rs 5 lakh in bank accounts
abroad, which may belong to students or those working there.
As
per the Act, those keen to avail the facility can declare their foreign assets
and income and pay a tax and penalty, each at 30 per cent of the value of the
undeclared assets. Upon fulfilling the conditions of the compliance window, a
person or entity shall not be prosecuted under the Bill and the declaration
made by him will not be used as evidence against him under the wealth tax Act,
the Foreign Exchange Management Act , the Companies Act or the Customs Act.
Wealth tax shall not be payable on any asset so disclosed.
However,
there are concerns that even a person paying taxes and penalties on previously
undeclared assets could yet be prosecuted under the Prevention of Money
Laundering Act . This is because the black money Act does not say fresh
declaration of undisclosed money or properties abroad will not be used as
evidence for prosecution under Prevention of Money Laundering Act. As stated
above, it guarantees immunity only from four laws. According to tax experts and
analysts, unless the Central Board of Direct Taxes clarifies its stance on Prevention
of Money Laundering Act, people with unaccounted wealth and assets abroad might
not declare their assets for fear of prosecution later. Experts say the
confusion is made worse with the Act proposing to amend Prevention of Money
Laundering Act to include tax evasion in relation to undisclosed foreign income
and assets under the proposed legislation as a scheduled offence.
However, senior government officials have
sought to dispel the concern, saying the four laws cited in the Act are enough
to safeguard against any later prosecution under other laws. They say Prevention
of Money Laundering Act can only be invoked if there is a predicated offence
committed with regard to the money. The black money Bill was passed by
Parliament in this Budget session. It received Presidential assent and became
law on May 26, 2015 .
This scheme is in tune with the announcement
made by the Union Finance Minister Shri Arun Jaitley, in his Budget Speech this
year, that a comprehensive new law to deal with black money stashed away abroad
would be enacted.
G.S.R. 529 (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 85 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015), the Central Board of Direct Taxes with the approval of the Central Government hereby makes the following rules, namely:-
1. Short title and commencement. - (1) These rules may be called the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Definitions. - (1) In these rules, unless the context otherwise requires,-
(a) “Act” means the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015);
(b) “Chapter” means a Chapter of the Act;
(c) “Form” means a Form appended to these rules;
(d) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961);
(e) “section” means a section of the Act.
(2) Words and expressions used and not defined in these rules but defined in the Act, the Income-tax Act or the rules made thereunder, shall have the meanings respectively assigned to them in those Acts and rules.
3. Fair market value. - (1) For the purposes of sub-section (2) of section 3 of the Act, the fair market value of the assets shall be determined in the following manner, namely:-
(a) value of bullion, jewellery or precious stone shall be the higher of,-
(I) its cost of acquisition; and
(II) the price that the bullion, jewellery or precious stone shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies for the purpose of valuation of bullion, jewellery or precious stone under any regulation or law;
(b) valuation of archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred to as artistic work) shall be the higher of,-
(I) its cost of acquisition; and
(II) the price that the artistic work shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies for the purpose of valuation of artistic work under any regulation or law;
(c) valuation of shares and securities,-
(I) the fair market value of quoted share and securities shall be the higher of,-
(i) its cost of acquisition; and
(ii) the price as determined in the following manner, namely:-
(A) the average of the lowest and highest price of such shares and securities quoted on any established securities market on the valuation date; or
(B) where on the valuation date there is no trading in such shares and securities on any established securities market, average of the lowest and highest price of such shares and securities on any established securities market on a date immediately preceding the valuation date when such shares and securities were traded on such securities market;
(II) the fair market value of unquoted equity shares shall be the higher of,-
(i) its cost of acquisition; and
(ii) the value, on the valuation date, of such equity shares as determined in the following manner, namely:-
the fair market value of unquoted equity shares = (A+B–L) / (PE)x (PV),
where,
A= book value of all the assets (other than bullion, jewellery, precious stone, artistic work, shares, securities and immovable property) as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and (ii) any amount
shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;
B= fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule;
L= book value of liabilities, but not including the following amounts, namely:-
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;
PE = total amount of paid up equity share capital as shown in the balance-sheet;
PV= the paid up value of such equity shares;
(III) the fair market value of unquoted share and security other than equity share in a company shall be the higher of,-
(i) its cost of acquisition; and
(ii) the price that the share or security shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies
for the purpose of valuation of share and security under any regulation or law;
(d) the fair market value of an immovable property shall be higher of,-
(I) its cost of acquisition; and
(II) the price that the property shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a valuation report from a valuer recognised by the Government of a country or specified territory outside India in which the property is located or any of its agencies for the purpose of valuation of immovable property under any regulation or law;
(e) value of an account with a bank shall be,-
(I) the sum of all the deposits made in the account with the bank since the
date of opening of the account; or
(II) where a declaration of such account has been made under Chapter VI and the value of the account as computed under sub-clause (I) has been charged to tax and penalty under that Chapter, the sum of all the deposits made in the account with the bank since the date of such declaration:
Provided that where any deposit is made from the proceeds of any withdrawal from the account, such deposit shall not be taken into consideration while computing the value of the account.
(f) value of an interest of a person in a partnership firm or in an association of persons or a limited liability partnership of which he is a member shall be determined in the manner specified in clause (g).
(g) The net asset of the firm, association of persons or limited liability partnership on the valuation date shall first be determined and the portion of the net asset of the firm, association of persons or limited liability partnership as is equal to the amount of its capital shall be allocated among its partners or members in the proportion in which capital has been contributed by them and the residue of the net asset shall be allocated among the partners or members in accordance with the agreement of partnership or association for distribution of assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits and the sum total of the amount so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the partnership or association.
Explanation.- For the purposes of this clause the net asset of the firm, association of persons or limited liability partnership shall be (A + B – L),
which shall be determined in the manner provided in sub-clause (II) of clause (c).
(h) valuation of any other asset shall be higher of,-
(I) its cost of acquisition or the amount invested; and
(II) the price that the asset would fetch if sold in the open market on the valuation date in an arm’s-length transaction.
(2) Notwithstanding anything contained in sub-rule (1), where an asset (other than a bank account) was transferred before the valuation date the fair market value of such asset shall be higher of its cost of acquisition and the sale price:
Provided that where such asset was transferred without consideration or inadequate consideration before the valuation date, the fair market value of the asset shall be higher of its cost of acquisition and the fair market value on the date of transfer.
(3) Where a new asset has been acquired or made out of consideration received on account of transfer of an old asset or withdrawal from a bank account, then the fair market value of the old asset or the bank account, as the case may be, determined in accordance with sub-rule (1) and sub-rule (2) shall be reduced by the amount of the consideration invested in the new asset.
Illustration
A house property (H1) located outside India was bought in 1997 for twenty lakh rupees. It was sold in 2001 for twenty five lakh rupees which were deposited in a foreign bank account (BA). In 2002 another house property (H2) was bought for thirty lakh rupees. The investment in H2 was made through withdrawal from BA. H2 has not been transferred before the valuation date and its value on the valuation date is fifty lakh rupees. Assuming that the value of BA as computed under Rule 3(1)(e) is seventy lakh rupees, the fair market value (FMV) of the assets shall be as below:
FMV of H1: (Higher of Rs. 20 lakh and 25 lakh) – Rs. 25 lakh (invested in BA) = Nil FMV of BA: Rs. 70 lakh – Rs. 30 lakh (invested in H2) = Rs. 40 lakh, FMV of H2: (Higher of Rs. 30 lakh and 50 lakh) = Rs. 50 lakh
(4) The fair market value of an asset determined in a currency which is one of the permitted currencies designated by the Reserve Bank of India under the Foreign Exchange Management Regulations, shall be converted into Indian currency as per the reference rate of the Reserve Bank of India on the date of valuation.
(5) Where the fair market value of an asset is determined in a currency other than one of the permitted currencies designated by the Reserve Bank of India, then, such value shall be converted into United States Dollar on the date of valuation as per the rate specified by the
Central Bank of the country or jurisdiction in which the asset is located and such value in United States Dollar shall be converted into Indian currency as per the reference rate of the Reserve Bank of India on the date of valuation:
Provided that where the Central Bank of the country or jurisdiction in which the asset is located does not specify the rate of conversion from its local currency to United States Dollar then such rate shall be the one as specified by any other bank regulated under the laws of that country or jurisdiction.
Explanation 1.- For the purposes of this rule,-
(a) “established securities market” means an exchange that is officially recognised and supervised by a Governmental entity in which the market is located and that has a meaningful annual value of shares traded on the exchange;
(b) “meaningful annual value of shares traded on the exchange” with respect to an exchange means it has an annual value of shares traded on the exchange (or a predecessor exchange) exceeding one billion United States Dollar during each of the three calendar years immediately preceding the calendar year in which the determination is being made;
(c) “meaningful volume of trading on an on-going basis” with respect to each class of shares means,- (i) trades in each such class are effected, other than in de minimis quantities, on one or more established securities markets on at least sixty business days during the prior calendar year; and (ii) the aggregate number of shares in each such class that are traded on such market or markets during the prior year are at least ten percent. of the average number of shares outstanding in that class during the prior calendar year;
(d) “quoted share or security” means the share or security which has a meaningful volume of trading on an ongoing basis on an established securities market and is regularly quoted by dealers where they actively do offer to, and in fact do, purchase the share from, and sell the share to, customers who are not related to the dealer in the ordinary course of a business;
(e) “unquoted share and security” in relation to share or security means share or security which is not a quoted share or security.
Explanation 2.- For the purpose of determining the market value as on valuation date referred to in in sub-rule (1), and for the purpose of conversion into Indian currency or conversion of foreign currency into United States Dollar and thereafter into Indian currency, the date shall be-
(a) in respect of asset declared under section 59 of the Act, the 1st day of July, 2015;
(b) in any other case, the 1st day of April of the previous year.
4. Tax authorities.- For the purposes of section 8, the tax authorities shall be the Assessing Officer, Joint Commissioner, Commissioner (Appeals), Commissioner or Principal Commissioner, Chief Commissioner or Principal Chief Commissioner.
5. Notice of demand. - Where any tax, interest or penalty is payable in consequence of any order passed under the provisions of the Act, the Assessing Officer shall serve upon the assessee a notice of demand in Form 1 specifying the sum so payable.
6. Appeal to Commissioner (Appeals). - (1) An appeal under sub-section (1) of section
15 to the Commissioner (Appeals) shall be made in Form 2.
(2) The form of appeal referred to in sub-rule (1), the grounds of appeal and the form of verification appended thereto relating to an assessee shall be signed and verified by the person who is authorised to sign the return of income under section 140 of the Income-tax Act, as applicable to the assessee.
(3) Every appeal filed under sub-section (1) of section 15 shall be accompanied by a fee of ten thousand rupees.
(4) No appeal under sub-section (1) of section 15 shall be admitted unless at the time of filing of the appeal the assessee has paid the tax alongwith penalty and interest thereon on the amount of liability which has not been objected to by the assessee.
7. Appeal to Appellate Tribunal. - (1) An appeal under sub-section (1) of section 18 to the Appellate Tribunal shall be made in Form 3, and where the appeal is made by the assessee, the form of appeal, the grounds of appeal and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 6.
(2) The memorandum of cross-objections under sub-section (4) of section 18 to the Appellate Tribunal shall be made in Form 4, and where the memorandum of cross objection is made by the assessee, the form of memorandum of cross-objections, the grounds of cross-objections and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 6.
(3) Every appeal filed under sub-section (1) of section 18 shall be accompanied by a fee of twenty five thousand rupees.
8. Form of tax arrears.- A statement of tax arears under section 31 or section 33 shall be drawn up by the Tax Recovery Officer in Form 5.
9. Declaration of undisclosed asset located outside India under section 59.- (1) A declaration in respect of any undisclosed asset located outside India under section 59 of the Act shall be made in Form 6.
(2) The Principal Commissioner or the Commissioner shall grant an acknowledgement in Form 7 to the declarant within fifteen days of the submission of proof of payment of tax alongwith penalty by the declarant under sub-section (2) of section 63 of the Act in respect of the undisclosed asset located outside India.
10. Educational qualifications.- The educational qualifications for the purpose of clause (f) of sub-section (3) of section 78 shall be the same as those prescribed in rule 51 of the Income-tax Rules, 1962.
11. Authority in certain cases.- For the purposes of clause (c) of sub-section (4) of section 78, the authority shall be the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over the case in the proceedings connected with which the tax practitioner is alleged to be guilty of misconduct.
12. Rounding off of income, value of asset and tax. - For the purpose of section 79 the amount of undisclosed foreign income and asset computed in accordance with the Act and any amount payable or receivable by the assessee under the Act shall be rounded off to the nearest multiple of one hundred rupees or ten rupees, as the case may be and for this purpose, where such amount contains a part of a rupee consisting of paise then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.
BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015 - CLARIFICATIONS ON TAX COMPLIANCE FOR UNDISCLOSED FOREIGN INCOME AND ASSETS CIRCULAR NO.13 OF 2015 [F.NO.142/18/2015-TPL], DATED 6-7-2015
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as 'the Act') has introduced a tax compliance provision under Chapter VI of the Act. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015 (hereinafter referred to as 'the Rules') have been notified. In regard to the scheme queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of a circular in the form of questions and answers as follows.—
Question No.1: If firm has undisclosed foreign assets, can the partner file declaration in respect of such asset?
Answer: The declaration can be made by the firm which shall be signed by the person specified in sub-section (2) of section 62 of the Act. The partner cannot make a declaration in his name. However, the partner may file a declaration in respect of an undisclosed asset held by him.
Question No.2: Where a company has undisclosed foreign assets, can it file a declaration under Chapter VI of the Act? If yes, then whether immunity would be granted to Directors of the company?
Answer: Yes, the company can file a declaration under Chapter VI of the Act. The Directors of the company shall not be liable for any offence under the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act in respect of declaration made in the name of the company.
Question No.3: Whether immunity in respect of declaration made under the scheme is provided in respect of Acts other than those mentioned in section 67 of the Act?
Answer: Section 67 provides immunity from prosecution under the five Acts viz. the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act. It does not provide immunity from prosecution under any other Act. For example- if the undisclosed asset has been acquired out of the proceeds of sale of protected animals the person will not be eligible for immunity under the Wildlife (Protection) Act, 1972.
Question No.4: Whether the person making the declaration will be provided immunity from the Prevention of Money Laundering Act, 2002?
Answer: The offence under the PMLA arises while laundering money generated from the process or activity connected with the offences specified in the schedule to the PMLA. Therefore, the primary requirement under PMLA is commission of a scheduled offence. With the enactment of the Act, the offence of wilful attempt to evade tax under section 51 of the Act has become a scheduled offence under PMLA. However, where a declaration of an asset has been duly made under section 59 of the Act the provisions of section 51 will not be applicable in respect of that asset. Therefore, PMLA will not be applicable in respect of the scheduled offence of willful attempt to evade tax under section 51 of the Act in respect of assets for which declaration is made under section 59 of the Act.
Question No.5: Where an undisclosed foreign asset is declared under Chapter VI of the Act and tax and penalty is paid on its fair market value then will the declarant be liable for capital gains on sale of such asset in the future? If yes, then how will the capital gains in such case be computed?
Answer: Yes, the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future. As per the current provisions of the Income-tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. However, since the asset will be taxed at its fair market value the cost of acquisition for the purpose of Capital Gains shall be the said fair market value and the period of holding shall start from the date of declaration of such asset under Chapter VI of the Act.
Question No.6: Where a notice under section 142/143(2)/148/153A/153C of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from voluntary declaration under section 59 of the Act?
Answer: The person will only be ineligible from declaration of those foreign assets which have been acquired during the year for which a notice under section 142/143(2) /148/153A/153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare other foreign assets which have been acquired during other years for which no notice under above referred sections have been issued.
Question No.7: As per section 71(d)(i), declaration cannot be made where an undisclosed asset has been acquired during any previous year relevant to an assessment year for which a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued. If the notice has been issued but not served on the declarant then how will he come to know whether the notice has been issued?
Answer: The declarant will not be eligible for declaration under Chapter VI of the Act where an undisclosed asset has been acquired during any previous year relevant to any assessment year where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued and served on the declarant on or before 30th day of June, 2015. The declarant is required to file a declaration regarding receipt of any such notice in Form 6.
Question No. 8: Where an undisclosed foreign asset has been acquired partly during a previous year relevant to the assessment year which is pending for assessment and partly during other years not pending for assessment then whether such asset is eligible for declaration under Chapter VI of the Act?
Answer: In the case where proceedings are pending before an Assessing Officer in pursuance of a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act served on or before 30-06-2015, the declarant may declare the undisclosed asset under Chapter VI of the Act. However, while computing the amount of declaration the investment made in the asset during the previous year relevant to the assessment year for which such notice is issued needs to be deducted from the fair market value of the asset for which the person shall provide a computation alongwith the declaration. Further, such investment which is deducted from the fair market value shall be assessable in the assessment of the relevant assessment year pending under the Income-tax Act and the person shall inform the Assessing Officer the investment made during the relevant year in such asset. Also to clarify, where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act is issued on or after 30-06-2015, the declarant shall be eligible to declare full value of asset even if such asset (or part of such asset) is acquired in the previous year relevant to the assessment year for which such notice is issued.
Question No.9: Can a declaration be made of undisclosed foreign assets which have been assessed to tax and the case is pending before an Appellate Authority?
Answer: As per section 65 of the Act, the declarant is not entitled to re-open any assessment or reassessment made under the Income-tax 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 the Income-tax Act.
Question No.10: Can a person against whom a search/survey operation has been initiated file
voluntary declaration under Chapter VI of the Act?
Answer:
(a) The person is not eligible to make a declaration under Chapter VI if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. In this case, however, the person is eligible to file a declaration in respect of an undisclosed foreign asset acquired in any previous year in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A
.(b) In case of survey operation the person is barred from making a declaration under Chapter VI in respect of an undisclosed asset acquired in the previous year in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed asset acquired in any other previous year.
Question No. 11: Where a search/survey operation was conducted and the assessment has been completed but the undisclosed foreign asset was not taxed, then whether such asset can be declared under Chapter VI of the Act?
Answer: Yes, such undisclosed asset can be declared under Chapter VI of the Act.
Question No. 12 : Whether a person is barred from voluntary declaration under Chapter VI of the Act if any information has been received by the Government under DTAA?
Answer: As per section 71(d)(iii), 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.
Question No.13: How would the person know that the Government has received information of an undisclosed foreign asset held by him which will make the declaration ineligible?
Answer: The person may not know that the Government has information about undisclosed foreign asset held by him if the same has not been communicated to him in any inquiry / proceeding under the Income-tax Act. After the person has filed a declaration, which is to be filed latest by 30th September, 2015, he will be issued intimation by the Principal Commissioner/Commissioner by 31st October, 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 30th June, 2015 by the Government in respect of such asset the person will be allowed a time up to 31st December, 2015 for payment of tax and penalty in respect of the declared asset. There may be a case where person makes declaration in respect of 5 assets whereas the Government has information about only 1 asset. In such situation the person will be eligible to declare the balance 4 assets under Chapter VI of the Act. In such case the declarant, on receipt of intimation by the Principal Commissioner/Commissioner, shall revise the declaration made within 15 days of such receipt of intimation to exclude the asset which is not eligible for declaration. Tax and penalty on the eligible assets under the Act shall be payable in respect of the revised declaration by 31st of December, 2015. In respect of the ineligible assets provisions of the Income-tax Act shall apply. (Please also see answer to question no. 15)
Question No. 14 : What are the consequences if no declaration under Chapter VI of the Act is made in respect of undisclosed foreign assets acquired prior to the commencement of the Act?
Answer: As per section 72(c), where any asset has been acquired prior to the commencement of the Act and no declaration under Chapter VI of the Act is made then such asset 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. India is expected to start receiving information through Automatic Exchange of Information (AEOI) route under FATCA from USA later in the year 2015. Further, under the multilateral agreement India will start receiving information from other countries under AEOI route from 2017 onwards. As at 18th March 2015, 58 jurisdictions (including India) have committed to share information under AEOI by 2017 and 36 jurisdictions have committed to share by 2018, including jurisdictions which have beneficial tax regime. The multilateral agreement is expected to cover all the countries in the near future. The information under the AEOI will include information of controlling persons(beneficial owners) of the asset. The possibility of discovery of an undisclosed asset may arise at any time in the future; say for example, information of an immovable property can be unearthed if any utility bills/property tax or even gardener's/caretaker's salary has been paid through an existing or closed bank account. Therefore, if any information of an undisclosed foreign asset acquired earlier, say in the year 1975, for $ 100,000 comes to the notice of an Assessing Officer later, say in the year 2020, when its value becomes, say, $ 5 Million, the liability under the Act amounting to 120 percent of the fair market value of the asset on the valuation date may arise in the year 2020, besides prosecution and other consequences. In this case if the valuation date is in the year 2020 the amount of tax and penalty under the Act will be $ 6 Million.
Question No.15: If a declaration of undisclosed foreign asset is made under Chapter VI of the Act and the same was found ineligible due to the reason that Government had prior information under DTAA then will the person be liable for consequences under the Act?
Answer: In respect of such assets which have been duly declared in good faith under the tax compliance but not found eligible, he shall not be hit by section 72(c) of the Act and no action lies in respect of such assets under the Act. However, such information may be used for the purpose of the Income-tax Act.
Question No.16: In respect of the undisclosed foreign assets referred to in answer to question No. 15 above, where the proceedings under the Income-tax Act are initiated, can the options of settlement commission etc. under the Income-tax Act be availed in respect of such assets?
Answer: All the provisions of the Income-tax Act shall be applicable in respect of those assets.
Question No.17: A person has some undisclosed foreign assets. If he declares those assets in the Income-tax Return for assessment year 2015-16 or say 2014-15 (in belated return) then should he need to declare those assets in the voluntary tax compliance under Chapter VI of the Act?
Answer: As per the Act, the undisclosed foreign asset means an asset which is unaccounted/the source of investment in such asset is not fully explainable.Since an asset reported in Schedule FA does not form part of computation of total income in the Income-tax Return and consequently does not get taxed, mere reporting of a foreign asset in Schedule FA of the Return does not mean that the source of investment in the asset has been explained. The foreign asset is liable to be taxed under the Act (whether reported in the return or not) if the source of investment in such asset is unexplained. Therefore, declaration should be made under Chapter VI of the Act in respect of all those foreign assets which are unaccounted/the source of investment in such asset is not fully explainable.
Question No.18: A person holds certain foreign assets which are fully explained and acquired out of tax paid income. However, he has not reported these assets in Schedule FA of the Income-tax Return in the past. Should he declare such assets under Chapter VI of the Act?
Answer: Since, these assets are fully explained they are not treated as undisclosed foreign assets and should not be declared under Chapter VI of the Act. However, if theseassets are not reported in Schedule FA of the Income-tax Return for assessment year 2016-17 (relating to previous year 2015-16) or any subsequent assessment year by a person, being a resident (other than not ordinarily resident), then he shall be liable for penalty of Rs. 10 lakhs under section 43 of the Act. The penalty is, however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs. 5 lakhs at any time during the previous year.
Question No.19: A person has a foreign bank account in which undisclosed income has been deposited over several years. He has spent the money in the account over these years and now it has a balance of only $500. Does he need to pay tax on this $500 under the declaration?
Answer: Section 59 of the Act provides for declaration of an undisclosed asset and not income. In this case the Bank account is an undisclosed asset which may be declared. Tax on undisclosed asset is required to be paid on its fair market value. In case of a bank account the fair market value is the sum of all the deposits made in the account computed in accordance with Rule 3(1)(e). Therefore, tax and penalty needs to be paid on such fair market value and not on the balance as on date.
Question No. 20: A person held a foreign bank account for a limited period between 1994-95 and 1997-98 which was unexplained. Since such account was closed in 1997-98 does he need to declare the same under Chapter VI of the Act?
Answer: Section 59 of the Act provides that the declaration may be made of any undisclosed foreign asset which has been acquired from income which has not been charged to tax under the Income-tax Act. Since the investment in the bank account was unexplained and was from untaxed income the same may be declared under Chapter VI of the Act. The consequences of non-declaration may arise under the Act at any time in the future when the information of such account comes to the notice of the Assessing Officer.
Question No.21: A person inherited a house property in 2003-04 from his father who is no more. Such property was acquired from unexplained sources of investment. The property was sold by the person in 2011-12. Does he need to declare such property under Chapter VI of the Act and if yes then, what will be the fair market value of such property for the purpose of declaration?
Answer: Since the property was from unexplained sources of investment the same may be declared under Chapter VI of the Act. However, the declaration in this case needs 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 as per Rule 3(2) of the Rules.
Question No.22: A person acquired a house property in a foreign country during the year 2000-01 from unexplained sources of income. The property was sold in 2007-08 and the proceeds were deposited in a foreign bank account. Does he need to declare both the assets under Chapter VI of the Act and pay tax on both the assets?
Answer: The declaration may be made in respect of both the house property and the bank account at their fair market value. The fair market value of the house property shall be higher of its cost and the sale price, less amount deposited in bank account. If the cost price of the house property is higher the declarant will be required to pay tax and penalty on (cost price – sale price) of the house. If the sale price of the house property is higher the fair market value of the house property shall be nil as full amount was deposited in the bank account. The fair market value of the bank account shall be as determined under Rule 3(1)(e) and tax and penalty shall be paid on this amount. (Please also refer to the illustration under Rule 3(3) for computation of fair market value.)Further, it is advisable to declare all the undisclosed foreign assets even if the fair market value as computed in accordance with Rule 3 comes to nil. This may avoid initiation of any inquiry under the Act in the future in case such asset comes to the notice of the Assessing Officer.
Question No.23: A person is a non-resident. However, he was a resident of India earlier and had acquired foreign assets out of income chargeable to tax in India which was not declared in the return of income or no return was filed in respect of that income. Can that person file a declaration under Chapter VI of the Act?
Answer: Section 59 provides that a declaration may be made by any person of an undisclosed foreign asset acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to assessment year 2016-17. Since the person was a resident in the year in which he had acquired foreign assets(which were undisclosed) out of income chargeable to tax in India, he is eligible to file a declaration under section 59 in respect of those assets under Chapter VI of the Act.
Question No.24: A person is a resident now. However, he was a non-resident earlier when he had acquired foreign assets (which he continues to hold now) out of income which was not chargeable to tax in India. Does the person need to file a declaration in respect of those assets under Chapter VI of the Act?
Answer: No. Those assets do not fall under the definition of undisclosed assets under the Act.
Question No. 25: If a person has 3 undisclosed foreign assets and declares only 2 of those under Chapter VI of the Act, then will he get immunity from the Act in respect of the 2 assets declared?
Answer: It is expected that one should declare all his undisclosed foreign assets. However, in such a case the person will get immunity under the provisions of the Act in respect of the two assets declared under Chapter VI of the Act and no immunity will be available in respect of the third asset which is not declared.
Question No. 26: A resident earned income outside India which has been deposited in his foreign bank account. The income was charged to tax in the foreign country when it was earned but the same was not declared in the return of income in India and consequently not taxed in India. Does he need to disclose such income under Chapter VI of the Act? Will he get credit of foreign tax paid?
Answer: Declaration under Chapter VI is to be made of an undisclosed foreign asset. In this case, the person being a resident of India, the foreign bank account needs to be declared under Chapter VI as it is an undisclosed asset and acquired from income chargeable to tax in India. The fair market value of the bank account shall be determined as per Rule 3(1)(e). No credit of foreign taxes paid shall be allowable in India as section 84 of the Act does not provide for application of sections 90(1)(a)/90(1)(b)/90A(1)(a)/90A(1)(b) of the Income-tax Act (relating to credit of foreign tax paid) to the Act. Further, section 73 of the Act does not allow agreement with foreign country for the purpose of granting relief in respect of tax chargeable under the Act.
Question No. 27: Can a person declare under Chapter VI his undisclosed foreign assets which have been acquired from money earned through corruption?
Answer: No. As per section 71(b) of the Act, Chapter VI shall not apply, inter-alia, in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such asset cannot be made under Chapter VI. However, if such a declaration is made and in an event it is found that the asset represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 68 of the Act. If a declaration is held as void, the provisions of the Act shall apply in respect of such asset as they apply in relation to any other disclosed foreign asset.
Question No. 28: If a foreign asset has been acquired partly out of undisclosed income chargeable to tax and partly out of disclosed income/exempt income (tax paid income) then whether that foreign asset will be treated as undisclosed? Whether declaration under Chapter VI needs to be made in respect of such asset? If yes, what amount should be disclosed?
Answer: As per section 5 of the Act, in computing the value of an undisclosed foreign asset any income which has been assessed to tax under the Income-tax Act from which that asset is acquired shall be reduced from the value of the undisclosed foreign asset. Only part of the investment is such foreign asset is undisclosed (unexplained) hence declaration of such foreign asset may be made under Chapter VI of the Act. The amount of declaration shall be the fair market value of such asset as on 1st July, 2015 as reduced by the amount computed in accordance with section 5 of the Act.
Question No. 29: Whether for the purpose of declaration, the undisclosed foreign asset should be held by the declarant on the date of declaration?
Answer: No, there is no such requirement. The declaration may be made if the foreign asset was acquired out of undisclosed income even if the same has been disposed off and is not held by the declarant on the date of declaration.
Question No. 30: Whether at the time of declaration under Chapter VI, will the Principal Commissioner/Commissioner do any inquiry in respect of the declaration made?
Answer: After the declaration is made the Principal Commissioner/Commissioner will enquire whether any information has been received by the competent authority in respect of the asset declared. Apart from this no other enquiry will be conducted by him at the time of declaration.
Question No. 31: A person is a beneficiary in a foreign asset. Is he eligible for declaration under section 59 of the Act?
Answer: As far as ownership is concerned, as per section 2(11) of the Act "undisclosed asset located outside India" means an asset held by the person in his name or in respect of which he is a beneficial owner. The definition of "beneficial owner" and "beneficiary" is provided in Explanation 4 and Explanation 5 to section 139(1) of the Income-tax Act, respectively (which is at variance with the determination of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005). Therefore, for the purpose of the Act "beneficial owner" in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. Further, "beneficiary" in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. Therefore, as per the Act the beneficial owner is eligible for declaration under section 59 of the Act. There may be a case where a person is listed as a beneficiary in a foreign asset, however, if he has provided consideration for the asset, directly or indirectly, he will be covered under the definition of beneficial owner for the purposes of the Act.
Question No. 32: A person was employed in a foreign country where he acquired or made an asset out of income earned in that country. Whether such asset is required to be declared under Chapter VI of the Act?
Answer: If the person, while he was a non-resident in India, acquired or made a foreign asset out of income which is not chargeable to tax in India, such asset shall not be an undisclosed asset under the Act. However, if income was accrued or received in India while he was non-resident, such income is chargeable to tax in India. If such income was not disclosed in the return of income and the foreign asset was acquired from such income then the asset becomes undisclosed foreign asset and the person may declare such asset under Chapter VI of the Act.
Readers are
requested to seek expert advice before filing their papers under the scheme. We
welcome your questions and shall be glad to offer written opinion or other
professional services in this regard. Queries can be mailed to caindia@hotmail.com
- A. K. Jain , Cell No. : 98-100-46108
THE GAZETTE OF INDIA, EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)
New Delhi, the 2nd of July, 2015
Notification
G.S.R. 529 (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 85 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015), the Central Board of Direct Taxes with the approval of the Central Government hereby makes the following rules, namely:-
1. Short title and commencement. - (1) These rules may be called the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Definitions. - (1) In these rules, unless the context otherwise requires,-
(a) “Act” means the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015);
(b) “Chapter” means a Chapter of the Act;
(c) “Form” means a Form appended to these rules;
(d) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961);
(e) “section” means a section of the Act.
(2) Words and expressions used and not defined in these rules but defined in the Act, the Income-tax Act or the rules made thereunder, shall have the meanings respectively assigned to them in those Acts and rules.
3. Fair market value. - (1) For the purposes of sub-section (2) of section 3 of the Act, the fair market value of the assets shall be determined in the following manner, namely:-
(a) value of bullion, jewellery or precious stone shall be the higher of,-
(I) its cost of acquisition; and
(II) the price that the bullion, jewellery or precious stone shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies for the purpose of valuation of bullion, jewellery or precious stone under any regulation or law;
(b) valuation of archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred to as artistic work) shall be the higher of,-
(I) its cost of acquisition; and
(II) the price that the artistic work shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies for the purpose of valuation of artistic work under any regulation or law;
(c) valuation of shares and securities,-
(I) the fair market value of quoted share and securities shall be the higher of,-
(i) its cost of acquisition; and
(ii) the price as determined in the following manner, namely:-
(A) the average of the lowest and highest price of such shares and securities quoted on any established securities market on the valuation date; or
(B) where on the valuation date there is no trading in such shares and securities on any established securities market, average of the lowest and highest price of such shares and securities on any established securities market on a date immediately preceding the valuation date when such shares and securities were traded on such securities market;
(II) the fair market value of unquoted equity shares shall be the higher of,-
(i) its cost of acquisition; and
(ii) the value, on the valuation date, of such equity shares as determined in the following manner, namely:-
the fair market value of unquoted equity shares = (A+B–L) / (PE)x (PV),
where,
A= book value of all the assets (other than bullion, jewellery, precious stone, artistic work, shares, securities and immovable property) as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and (ii) any amount
shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;
B= fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule;
L= book value of liabilities, but not including the following amounts, namely:-
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;
PE = total amount of paid up equity share capital as shown in the balance-sheet;
PV= the paid up value of such equity shares;
(III) the fair market value of unquoted share and security other than equity share in a company shall be the higher of,-
(i) its cost of acquisition; and
(ii) the price that the share or security shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a report from a valuer recognised by the Government of a country or specified territory outside India or any of its agencies
for the purpose of valuation of share and security under any regulation or law;
(d) the fair market value of an immovable property shall be higher of,-
(I) its cost of acquisition; and
(II) the price that the property shall ordinarily fetch if sold in the open market on the valuation date for which the assessee may obtain a valuation report from a valuer recognised by the Government of a country or specified territory outside India in which the property is located or any of its agencies for the purpose of valuation of immovable property under any regulation or law;
(e) value of an account with a bank shall be,-
(I) the sum of all the deposits made in the account with the bank since the
date of opening of the account; or
(II) where a declaration of such account has been made under Chapter VI and the value of the account as computed under sub-clause (I) has been charged to tax and penalty under that Chapter, the sum of all the deposits made in the account with the bank since the date of such declaration:
Provided that where any deposit is made from the proceeds of any withdrawal from the account, such deposit shall not be taken into consideration while computing the value of the account.
(f) value of an interest of a person in a partnership firm or in an association of persons or a limited liability partnership of which he is a member shall be determined in the manner specified in clause (g).
(g) The net asset of the firm, association of persons or limited liability partnership on the valuation date shall first be determined and the portion of the net asset of the firm, association of persons or limited liability partnership as is equal to the amount of its capital shall be allocated among its partners or members in the proportion in which capital has been contributed by them and the residue of the net asset shall be allocated among the partners or members in accordance with the agreement of partnership or association for distribution of assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits and the sum total of the amount so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the partnership or association.
Explanation.- For the purposes of this clause the net asset of the firm, association of persons or limited liability partnership shall be (A + B – L),
which shall be determined in the manner provided in sub-clause (II) of clause (c).
(h) valuation of any other asset shall be higher of,-
(I) its cost of acquisition or the amount invested; and
(II) the price that the asset would fetch if sold in the open market on the valuation date in an arm’s-length transaction.
(2) Notwithstanding anything contained in sub-rule (1), where an asset (other than a bank account) was transferred before the valuation date the fair market value of such asset shall be higher of its cost of acquisition and the sale price:
Provided that where such asset was transferred without consideration or inadequate consideration before the valuation date, the fair market value of the asset shall be higher of its cost of acquisition and the fair market value on the date of transfer.
(3) Where a new asset has been acquired or made out of consideration received on account of transfer of an old asset or withdrawal from a bank account, then the fair market value of the old asset or the bank account, as the case may be, determined in accordance with sub-rule (1) and sub-rule (2) shall be reduced by the amount of the consideration invested in the new asset.
Illustration
A house property (H1) located outside India was bought in 1997 for twenty lakh rupees. It was sold in 2001 for twenty five lakh rupees which were deposited in a foreign bank account (BA). In 2002 another house property (H2) was bought for thirty lakh rupees. The investment in H2 was made through withdrawal from BA. H2 has not been transferred before the valuation date and its value on the valuation date is fifty lakh rupees. Assuming that the value of BA as computed under Rule 3(1)(e) is seventy lakh rupees, the fair market value (FMV) of the assets shall be as below:
FMV of H1: (Higher of Rs. 20 lakh and 25 lakh) – Rs. 25 lakh (invested in BA) = Nil FMV of BA: Rs. 70 lakh – Rs. 30 lakh (invested in H2) = Rs. 40 lakh, FMV of H2: (Higher of Rs. 30 lakh and 50 lakh) = Rs. 50 lakh
(4) The fair market value of an asset determined in a currency which is one of the permitted currencies designated by the Reserve Bank of India under the Foreign Exchange Management Regulations, shall be converted into Indian currency as per the reference rate of the Reserve Bank of India on the date of valuation.
(5) Where the fair market value of an asset is determined in a currency other than one of the permitted currencies designated by the Reserve Bank of India, then, such value shall be converted into United States Dollar on the date of valuation as per the rate specified by the
Central Bank of the country or jurisdiction in which the asset is located and such value in United States Dollar shall be converted into Indian currency as per the reference rate of the Reserve Bank of India on the date of valuation:
Provided that where the Central Bank of the country or jurisdiction in which the asset is located does not specify the rate of conversion from its local currency to United States Dollar then such rate shall be the one as specified by any other bank regulated under the laws of that country or jurisdiction.
Explanation 1.- For the purposes of this rule,-
(a) “established securities market” means an exchange that is officially recognised and supervised by a Governmental entity in which the market is located and that has a meaningful annual value of shares traded on the exchange;
(b) “meaningful annual value of shares traded on the exchange” with respect to an exchange means it has an annual value of shares traded on the exchange (or a predecessor exchange) exceeding one billion United States Dollar during each of the three calendar years immediately preceding the calendar year in which the determination is being made;
(c) “meaningful volume of trading on an on-going basis” with respect to each class of shares means,- (i) trades in each such class are effected, other than in de minimis quantities, on one or more established securities markets on at least sixty business days during the prior calendar year; and (ii) the aggregate number of shares in each such class that are traded on such market or markets during the prior year are at least ten percent. of the average number of shares outstanding in that class during the prior calendar year;
(d) “quoted share or security” means the share or security which has a meaningful volume of trading on an ongoing basis on an established securities market and is regularly quoted by dealers where they actively do offer to, and in fact do, purchase the share from, and sell the share to, customers who are not related to the dealer in the ordinary course of a business;
(e) “unquoted share and security” in relation to share or security means share or security which is not a quoted share or security.
Explanation 2.- For the purpose of determining the market value as on valuation date referred to in in sub-rule (1), and for the purpose of conversion into Indian currency or conversion of foreign currency into United States Dollar and thereafter into Indian currency, the date shall be-
(a) in respect of asset declared under section 59 of the Act, the 1st day of July, 2015;
(b) in any other case, the 1st day of April of the previous year.
4. Tax authorities.- For the purposes of section 8, the tax authorities shall be the Assessing Officer, Joint Commissioner, Commissioner (Appeals), Commissioner or Principal Commissioner, Chief Commissioner or Principal Chief Commissioner.
5. Notice of demand. - Where any tax, interest or penalty is payable in consequence of any order passed under the provisions of the Act, the Assessing Officer shall serve upon the assessee a notice of demand in Form 1 specifying the sum so payable.
6. Appeal to Commissioner (Appeals). - (1) An appeal under sub-section (1) of section
15 to the Commissioner (Appeals) shall be made in Form 2.
(2) The form of appeal referred to in sub-rule (1), the grounds of appeal and the form of verification appended thereto relating to an assessee shall be signed and verified by the person who is authorised to sign the return of income under section 140 of the Income-tax Act, as applicable to the assessee.
(3) Every appeal filed under sub-section (1) of section 15 shall be accompanied by a fee of ten thousand rupees.
(4) No appeal under sub-section (1) of section 15 shall be admitted unless at the time of filing of the appeal the assessee has paid the tax alongwith penalty and interest thereon on the amount of liability which has not been objected to by the assessee.
7. Appeal to Appellate Tribunal. - (1) An appeal under sub-section (1) of section 18 to the Appellate Tribunal shall be made in Form 3, and where the appeal is made by the assessee, the form of appeal, the grounds of appeal and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 6.
(2) The memorandum of cross-objections under sub-section (4) of section 18 to the Appellate Tribunal shall be made in Form 4, and where the memorandum of cross objection is made by the assessee, the form of memorandum of cross-objections, the grounds of cross-objections and the form of verification appended thereto shall be signed by the person specified in sub-rule (2) of rule 6.
(3) Every appeal filed under sub-section (1) of section 18 shall be accompanied by a fee of twenty five thousand rupees.
8. Form of tax arrears.- A statement of tax arears under section 31 or section 33 shall be drawn up by the Tax Recovery Officer in Form 5.
9. Declaration of undisclosed asset located outside India under section 59.- (1) A declaration in respect of any undisclosed asset located outside India under section 59 of the Act shall be made in Form 6.
(2) The Principal Commissioner or the Commissioner shall grant an acknowledgement in Form 7 to the declarant within fifteen days of the submission of proof of payment of tax alongwith penalty by the declarant under sub-section (2) of section 63 of the Act in respect of the undisclosed asset located outside India.
10. Educational qualifications.- The educational qualifications for the purpose of clause (f) of sub-section (3) of section 78 shall be the same as those prescribed in rule 51 of the Income-tax Rules, 1962.
11. Authority in certain cases.- For the purposes of clause (c) of sub-section (4) of section 78, the authority shall be the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over the case in the proceedings connected with which the tax practitioner is alleged to be guilty of misconduct.
12. Rounding off of income, value of asset and tax. - For the purpose of section 79 the amount of undisclosed foreign income and asset computed in accordance with the Act and any amount payable or receivable by the assessee under the Act shall be rounded off to the nearest multiple of one hundred rupees or ten rupees, as the case may be and for this purpose, where such amount contains a part of a rupee consisting of paise then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.
[Notification No. 58/2015 /F. No. 133/33/2015-TPL]
(Gaurav Kanaujia)
Director to the Government of India
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APPENDIX
FORM 1
[See rule 5]
Notice of demand
To
………………………
………………………. Status…………………
……………………….. PAN….. ……………..
1. This is to give you notice that for the assessment year …………… a sum of Rs.
………...…….., details of which are given on the reverse, has been determined to be payable by you.
2The amount should be paid to the Manager, authorised Bank or State Bank of India or Reserve Bank of India at …………………. within …………… days of the service of this notice. The previous approval of the Additional/ Joint Commissioner has been obtained for allowing a period of less than 30 days for the payment of the above sum.
3. If you do not pay the amount within the period specified above, proceedings for the recovery thereof will be taken in accordance with sections 30 to 39 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
4. If you intend to appeal against the assessment or penalty, you may present an appeal under section 15 of the Act, to the Commissioner (Appeals)…………. within thirty days of the receipt of this notice, in Form 2 as prescribed in rule 6, duly stamped and verified as laid down in that form.
5. The amount has become due as a result of the order of the Commissioner (Appeals) under section 15 of the Act. If you intend to appeal against the aforesaid order, you may present an appeal under section 18 of the Act to the Appellate Tribunal ……within sixty days of the receipt of that order, in Form 3, as prescribed in rule 7, duly stamped and verified as laid down in that form.
Place …………………
|
… ……………….
|
Date…………..
|
Assessing Officer
|
..…………………..
| |
Address
|
Notes:
1. Delete inappropriate paragraphs and words.
2. If you wish to pay the amount by cheque, the cheque shall be drawn in favour of the Manager, authorised Bank or State Bank of India India
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[See rule 6(1)]
Appeal to the Commissioner (Appeals) Designation of the Commissioner (Appeals)
*No…………..of 20………………………
1. Name and address of the appellant
2. Permanent Account Number
3. Assessment year in connection with which the appeal is preferred
4. Assessing Officer passing the order appealed against
5. Section and sub-section of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, under which the Assessing Officer passed the order appealed against and the date of such order
6. Where the appeal relates to any assessment or penalty, the date of service of the relevant notice of demand
7. In any other case, the date of service of the intimation of the order appealed against
8. Section and sub-section of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, under which the appeal is preferred
9. Relief claimed in appeal
10. Amount of tax alongwith penalty and interest thereon, arising out of the order in which appeal is preferred, that is not objected to by the appellant in appeal
11. Whether the undisputed amount referred to in item 10 has been paid (if yes, give details of date of payment, challan number and amount paid)
12. **Where an appeal in relation to any other assessment year is pending in the case of the appellant with any Commissioner (Appeals), give the details as to the -
(a) Commissioner (Appeals), with whom the appeal is pending;
(b) assessment year in connection with which the appeal has been preferred;
(c) Assessing Officer passing the order appealed against;
(d) Section and sub-section of the Act, under which the Assessing Officer passed the order appealed against and the date of such order
13. Address to which notices may be sent to the appellant
……………..
Signed (Appellant)
STATEMENT OF FACTS
GROUNDS OF APPEAL
……………..
Signed (Appellant)
Form of Verification
I, ……………………….…., the appellant, do hereby declare that what is stated above is true to the best of my information and belief.
Verified today the ………………….. day of …………………………
Place ………….
…….………….
Signature
Notes:
1. The form of appeal, grounds of appeal and the form of verification appended thereto shall be signed by a person in accordance with the provisions of rule 6(2).
2. The memorandum of appeal, statement of facts and the grounds of appeal shall be in duplicate accompanied by a copy of the order appealed against and the notice of demand in original, if any.
4. *These particulars will be filled in the office of the Commissioner (Appeals).
5. If the space provided herein is insufficient, separate enclosures may be used for the purpose.
6. **If appeals are pending in relation to more than one assessment year, separate particulars in respect of each assessment year may be given.
7. The memorandum of appeal shall be accompanied by a fee of ten thousand rupees.
8. The fee should be credited in a branch of the authorised Bank or a branch of the State Bank of India India
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[See rule 7(1)]
Form of appeal to the Appellate Tribunal
In the Appellate Tribunal ………………………
*Appeal No……………..of 20………………………………
………………………….. …………………………
APPELLANT versus RESPONDENT
1. The State in which the assessment was made
2. Permanent Account Number of the assessee (Appellant/Respondent)
3. Section under which the order appealed against was passed
4. Assessment year in connection with which the appeal is preferred
5. Total undisclosed foreign income and asset assessed by the Assessing Officer for the assessment year referred to in item 4
6. The Assessing Officer passing the original order
7. Section of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 under which the Assessing Officer passed the order
8. The Commissioner (Appeals) passing the order under section 12/ 15/45
9. Date of communication of the order appealed against
10. Address to which notices may be sent to the appellant
11. Address to which notices may be sent to the respondent
12. Relief claimed in appeal
GROUNDS OF APPEAL
| |||
1.
|
2.
|
3.
|
4.etc.
|
……………………………
|
…….………….
| ||
Signed
|
Signed
| ||
(Authorised representative, if any)
|
(Appellant)
| ||
Verification
I, …………………., the appellant, do hereby declare that what is stated above is true to the best of my information and belief.
Verified today the ………………….. day of …………………………
Place …………. …………………..
Signed
Notes:
1. The memorandum of appeal shall be in triplicate accompanied by two copies (at least one of which should be a certified copy) of the order appealed against, two copies of the relevant order of the Assessing Officer, two copies of the grounds of appeal before the first appellate authority, two copies of the statement of facts, if any, filed before the said appellate authority.
2. The memorandum of appeal by an assessee under sub-section (1) of section 18 of the shall be accompanied by a fee of twenty five thousand rupees.
3. The fee shall be credited in a branch of the authorised Bank or a branch of the State Bank of India India
4. The memorandum of appeal shall be written in English or, if the appeal is filed in a Bench located in any such State as is for the time being notified by the President of the Appellate Tribunal for the purposes of rule 5A of the Income-tax (Appellate Tribunal) Rules, 1963, then, at the option of the appellant, in Hindi, and shall set forth, concisely and under distinct heads, the grounds of appeal without any argument or narrative and such grounds shall be numbered consecutively.
5. *The number and year of appeal will be filled in the office of the Appellate Tribunal.
6. Delete the inapplicable columns. If the space provided is found insufficient, separate enclosures may be used for the purpose.
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[See rule 7(2)]
Form of memorandum of cross-objections to the Appellate Tribunal
IN THE APPELLATE TRIBUNAL ……………………………………………………………………
*Cross-objection No. …………………….. of ……………… - ……. **In Appeal No. ………………………of………………… - ……
……………………… Versus …………………………..
APPELLANT RESPONDENT
1. **Appeal No. allotted by the Tribunal to which memorandum of cross-objections relates
2. The State in which the assessment was made
3. Section under which the order appealed against was passed
4. Assessment year in connection with which the memorandum of cross-objections is preferred
5. Date of receipt of notice of appeal filed by the appellant to the Tribunal
6. Address to which notices may be sent to the respondent (cross-objector)
7. Address to which notices may be sent to the appellant
8. †Relief claimed in the memorandum of cross-objections
†GROUNDS OF CROSS-OBJECTIONS
1.
2.
3.
4. etc.
| |
……………………………………………
|
…………………………………
|
Signed
|
Signed
|
(Authorised representative, if any)
|
(Respondent)
|
Verification
I ……………………………………………, the respondent, do hereby declare that what is stated above is true to the best of my information and belief.
Verified today the …………. day of ……………………………..
…………………………..
Signed
Notes :
1. The memorandum of cross-objections must be in triplicate.
2. The memorandum of cross-objections should be written in English or, if the memorandum is filed in a Bench located in any such State as is for the time being notified by the President of the Appellate Tribunal for the purposes of rule 5A of the Income-tax (Appellate Tribunal) Rules, 1963, then, at the option of the respondent, in Hindi, and should set forth, concisely and under distinct heads, the cross-objections without any argument or narrative and such objections should be numbered consecutively.
3. *The number and year of memorandum of cross-objections will be filled in in the office of the Appellate Tribunal.
4. **The number and year of appeal as allotted by the office of the Tribunal and appearing in the notice of appeal received by the respondent is to be filled in here by the respondent.
5. †If the space provided is found insufficient, separate enclosures may be used for the purpose.
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[See rule 8]
Certificate under section 31 or 33 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Office of the TRO………………….
Dated the…………………………...
To
………………………………(PAN)
………………………………
1. * This is to certify that a sum of Rs. ………………..has become due from you on……………….. in the status of ……………………., details of which are given on the reverse.
Whereas a certificate bearing Serial Number……………… dated………………….. had been forwarded by the
Tax Recovery Officer, ……………………………...., for the recovery of the sum of Rs…………………..…
[name of the place]
details of which are given on the reverse and the said Tax Recovery Officer has sent a certified copy of the said certificate to the undersigned under section 33(2) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 specifying a sum of Rs………….. which is to be recovered from you.
2. You are hereby directed to pay the above sum within 15 days of the receipt of this notice failing which the recovery shall be made in accordance with the provisions of section 31 to section 39 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and the Second Schedule to the Income-tax Act, 1961 and the rules made thereunder.
3. In addition to the sums aforesaid, you will also be liable for all costs, charges and expenses incurred in respect of the services of this notice and of warrants and other processes and all other proceedings taken for realising the arrears.
SEAL ……………………....
Tax Recovery Officer
*Score out whichever paragraph is not applicable.
Amout (Rs.)
|
Asst. year
| |||
1.
|
Tax
| |||
2.
|
Penalty u/s……………
| |||
3. Interest u/s……………
| ||||
4.
|
Any other sum (give
| |||
details)
| ||||
5.
|
Total
| |||
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Form 6
Tax compliance for undisclosed foreign asset
[See rule 9(1)]
Form of declaration of undisclosed asset located outside India
To,
The Principal Commissioner/Commissioner
……………………………………
Sir/ Madam,
I hereby make a declaration under section 59 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. I give below the necessary particulars:−
1. Name of the declarant ……………….………………………………………………………………………
2. Address: Office………………………………………………………………………………………………
………………………………………………………………………………….………………..…
E-mail…………………………………………………..Telephone No…………………………..
Residence…………………………………………………………………………...........................
……………………………………………………………………………………….………………
E-mail…………………………………………………..Telephone No………..………………...
3.
|
Permanent Account Number (PAN)
|
………..………………………
|
(In case PAN is not held, please apply for PAN and quote here)
| ||
4.
|
Original/Revised declaration
|
………………………………
|
(If Revised provide date of filing original declaration)
| ||
5.
|
Status of the declarant
| |
(a) State whether individual, HUF, firm, company etc.
|
……………………………….
| |
(b) State whether Resident/Non-Resident/Not ordinarily resident
|
…………….…………………
|
6. Whether any Income-tax return has been filed? Yes/No. If Yes provide the following details
(a) Asst. Year for which last return filed …………….………
(b) Assessing Officer before whom filed, if above return filed in paper form ………………..……
7. Statement of undisclosed asset located outside India
8. Total amount of declaration of undisclosed asset located outside India
9.
|
Tax payable thereon (@ 30% of item 8)
|
Rs.………………..……...
|
10.
|
Penalty payable thereon (@ 30% of item 8)
|
Rs.…………………..…...
|
Tax paid, if any, on or before the date of declaration
|
Rs.…………….…………
| ||||||||||||||||||||||||||||||
(Attach proof of payment and provide details below)
| |||||||||||||||||||||||||||||||
Sl
|
BSR Code of Bank
|
Date of Deposit (DD/MM/YYYY)
|
Serial Number of
|
Amount (Rs)
| |||||||||||||||||||||||||||
Challan
| |||||||||||||||||||||||||||||||
(1)
|
(2)
|
(3)
|
(4)
|
(5)
| |||||||||||||||||||||||||||
i
| |||||||||||||||||||||||||||||||
ii
| |||||||||||||||||||||||||||||||
12.
|
Balance tax payable…………………………………………………………………………………………...
| ||||||||||||||||||||||||||||||
VERIFICATION
| |||||||||||||||||||||||||||||||
I……………………………………………son/daughter/wife of Shri……………………………………….................
| |||||||||||||||||||||||||||||||
(Full name in block letters)
|
(name of father/husband)
| ||||||||||||||||||||||||||||||
solemnly declare that−
| |||||||||||||||||||||||||||||||
(a) the information given in this declaration is correct and complete to the best of my knowledge and belief;
(b) my own undisclosed foreign asset and also any undisclosed foreign asset of other persons in respect of which I am chargeable to tax and income accruing or arising from assets held by me through any other person, for which I had failed to furnish a return under section 139 of the Income-tax Act, 1961/which I had failed to disclose in a return of income furnished by me before the commencement of the Act/which has otherwise escaped assessment, has been disclosed in this declaration;
(c) the provisions of section 71(a) in respect of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 are not applicable to me;
(d) the provision of section 71(b) in respect of Indian penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988 are not applicable to me;
(e) the undersigned has not been notified under section 3 of the Special Court
(f) the asset declared has not been acquired from income chargeable to tax under the Income-tax Act for any previous year relevant to assessment year,-
(i) where a notice under section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act has been received in respect of such assessment year and the proceeding is pending before the Assessing Officer;
(ii) where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and a notice under subsection (2) of section 143 of the said Act for the assessment year relevant to such previous year or a notice under section 153A or under section 153C of the said Act for an assessment year relevant to any previous year prior to such previous year has not been received and the time for issuance of such notice has not expired.
I further declare that I am making this declaration in my capacity as……………………………………………….
(designation)
and that I am competent to make this declaration and verify it.
…………………………………………………..
(Signature)
Place………………….
Date…………………..
* Score out whichever is not applicable.
Statement of undisclosed assets located outside India
Description of assets declared (Use separate sheet in case of multiple assets in the same category)
1. Bank account
(a)
|
Name and address of Bank
|
________________
|
(b)
|
Country of location
|
________________
|
(c)
|
Account holder name(s)
|
________________
|
(d)
|
Account Number
|
________________
|
(e)
|
Account opening date
|
________________
|
(f)
|
Sum of all credits in the account
|
________________
|
(g)
|
Fair market Value as per Rule 3
|
________________
|
(Provide separate computation if different from (f))
|
2. Immovable property (attach valuation report)
(a)
|
Nature of property (land/building/flat etc.)
|
________________
|
(b)
|
Address of the property
|
________________
|
(c)
|
Country of location
|
________________
|
(d)
|
Name(s) under which held
|
________________
|
(e)
|
Date of acquisition
|
________________
|
(f)
|
Total acquisition cost
|
________________
|
(g)
|
Value as estimated by the valuer on valuation date
|
________________
|
(h)
|
Fair Market value as per Rule 3
|
________________
|
(Provide separate computation if different from (f) or (g))
3. Jewellery (attach valuation report)
(a) Gold
(I) Purity ________, Weight _________, Value ____________
(II) Purity ________, Weight _________, Value ____________
(b) Diamond (1 carat or more)
(I) Carat ________, Cut _______, Colour ______, Clarity_______, Value ________
(II) Carat ________, Cut _______, Colour ______, Clarity_______, Value ________
(c)
|
Diamond (less than 1 carat) and other precious stones
|
Value __________
|
(d)
|
Other precious metals
|
Value__________
|
4. Artistic work (attach valuation report)
(a)
|
Nature of artistic work
|
__________________
|
(b)
|
Country of location
|
__________________
|
(c)
|
Name(s) under which held
|
________________
|
(d)
|
Date of acquisition
|
__________________
|
(e)
|
Cost of acquisition
|
__________________
|
Value of artistic work as estimated by the valuer
|
__________________
| |
(g)
|
Fair Market value as per Rule 3
|
________________
|
(Provide separate computation if different from (e) or (f))
|
5. Shares and securities
(a) Quoted shares and securities [Rule 3(1)(c)(I)]
(i) Description of security/share
(A)
|
Name of issuer
|
__________________
|
(B)
|
Number of securities/shares
|
__________________
|
(C)
|
Type of security/share
|
__________________
|
(ii)
|
Established securities market where quoted
|
__________________
|
(iii)
|
Country where securities market located
|
__________________
|
(iv)
|
Name(s) under which held
|
__________________
|
(v)
|
Cost of acquisition
|
__________________
|
(vi)
|
Date(s) of acquisition
|
__________________
|
(vii)
|
Value as determined under Rule 3(1)(c)(I)
|
__________________
|
(viii)
|
Date of valuation
|
__________________
|
(ix)
|
Fair Market value as per Rule 3
|
__________________
|
(Provide separate computation if different from (v) or (vii))
(b) Unquoted equity share [Rule 3(1)(c)(II)] (attach valuation report)
(i) Description of share
(A)
|
Name of issuer
|
__________________
| |
(B)
|
Number of shares
|
__________________
| |
(C)
|
Type of share
|
__________________
| |
(ii)
|
Country of location
|
__________________
| |
(iii)
|
Name(s) under which held
|
__________________
| |
(iv)
|
Cost of acquisition
|
__________________
| |
(v)
|
Date(s) of acquisition
|
__________________
| |
(vi)
|
Value as determined under Rule 3(1)(c)(II)
|
__________________
| |
(vii)
|
Date of valuation
|
__________________
| |
(viii)
|
Fair Market value as per Rule 3
|
__________________
| |
(Provide separate computation if different from (iv) or (vi))
(c) Unquoted shares and securities other than equity shares in a company [Rule 3(1)(c)(III)] (attach valuation report)
(i) Description of share/security
(A)
|
Name of issuer
|
__________________
| |
(B)
|
Number of securities/shares
|
__________________
| |
(C)
|
Type of security/share
|
__________________
| |
(ii)
|
Country of location
|
__________________
| |
(iii)
|
Name(s) under which held
|
__________________
| |
Cost of acquisition
|
__________________
| |
(v)
|
Date(s) of acquisition
|
__________________
|
(vi)
|
Value as determined under Rule 3(1)(c)(III)
|
__________________
|
(vii)
|
Date of valuation
|
__________________
|
(viii)
|
Fair Market value as per Rule 3
|
__________________
|
(Provide separate computation if different from (iv) or (vi))
(6) Any other asset
(a)
|
Description of asset
|
__________________
| |
(b)
|
Country of location
|
__________________
| |
(c)
|
Name(s) under which held
|
__________________
| |
(d)
|
Value as determined under Rule 3(1)
|
__________________
| |
(e)
|
Date of valuation
|
__________________
| |
(f)
|
Fair Market value as per Rule 3
|
__________________
| |
(Provide separate computation if different from (d))
| |||
(7)
|
Total fair market value of all the assets declared
|
__________________
| |
(8)
|
Deduction as per section 5 of the Act
|
___________________
| |
(where part of asset acquired from income already assessed under
the Income-tax Act) (to be provided in respect of each asset separately)
(9) Deduction on account of investment made in the asset during the previous year relevant to the assessment year for which a notice
u/s 142/143(2)/148/153A/153C of the I.T. Act is issued ___________________
(10) Total fair market value of all the undisclosed assets declared (7-8-9 ) ____________________
(to be taken to item 8 of the form)
……………………………
(Signature)
……………………………
(Name)
Place………………….
Date………………….
NOTES:
1. If the total amount of tax payable is not paid before 31st December 2015 , the declaration will be treated as void and shall be deemed never to have been made.
2. If the declaration is made by misrepresentation or suppression of facts it shall be void and shall be deemed never to have been made.
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Tax compliance for undisclosed foreign asset
[See rule 9(2)]
Acknowledgement of declaration of undisclosed foreign asset under Chapter VI of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Office of the Principal Commissioner/Commissioner of Income-tax,
………………………………
……………………………...
This is to acknowledge that a declaration under section 59 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 has been accepted in respect of the following:
1) Name and address of the declarant: …………………………………………………………..
…………………………………………………………..
| ||
…………………………………………………………..
| ||
2)
|
Son/Daughter/Wife of
|
…………………………………………………………...
|
3)
|
PAN
|
……………………………………………………………
|
4) Receipt No. and date of filing the Declaration: ………………………………………………………..
5)
|
Details of Declaration [As per Annexure to Form 6 (to be countersigned by the Principal
| ||
Commissioner or Commissioner)]
| |||
Total fair market value of all the assets declared
| |||
and accepted
|
Rs. ………………………………………………
| ||
6)
|
Tax payable on the assets declared & accepted
|
Rs. ………………………………………………
| |
7)
|
Penalty payable on the assets declared & accepted
|
Rs. ……………………………………………....
| |
8)
|
Total Amount payable (6) + (7)
|
Rs.
|
………………………………………………………
|
9) Details of tax paid
Sl
|
BSR Code of Bank
|
Date of Deposit (DD/MM/YYYY)
|
Serial Number of
|
Amount (Rs)
| |||||||||||||||||||||||||
Challan
| |||||||||||||||||||||||||||||
(1)
|
(2)
|
(3)
|
(4)
|
(5)
| |||||||||||||||||||||||||
i
| |||||||||||||||||||||||||||||
ii
| |||||||||||||||||||||||||||||
Date: ……………………
………………………………..
(Principal Commissioner/Commissioner of Income-tax)
NOTE:
No acknowledgement will be issued unless the total amount of tax and penalty payable has been paid.
(Gaurav Kanaujia) Director to the Government of India
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CBDT'S CLARIFICATIONS
QUESTION AND ANSWER FORMAT
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (hereinafter referred to as 'the Act') has introduced a tax compliance provision under Chapter VI of the Act. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015 (hereinafter referred to as 'the Rules') have been notified. In regard to the scheme queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of a circular in the form of questions and answers as follows.—
Question No.1: If firm has undisclosed foreign assets, can the partner file declaration in respect of such asset?
Answer: The declaration can be made by the firm which shall be signed by the person specified in sub-section (2) of section 62 of the Act. The partner cannot make a declaration in his name. However, the partner may file a declaration in respect of an undisclosed asset held by him.
Question No.2: Where a company has undisclosed foreign assets, can it file a declaration under Chapter VI of the Act? If yes, then whether immunity would be granted to Directors of the company?
Answer: Yes, the company can file a declaration under Chapter VI of the Act. The Directors of the company shall not be liable for any offence under the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act in respect of declaration made in the name of the company.
Question No.3: Whether immunity in respect of declaration made under the scheme is provided in respect of Acts other than those mentioned in section 67 of the Act?
Answer: Section 67 provides immunity from prosecution under the five Acts viz. the Income-tax Act, Wealth-tax Act, FEMA, Companies Act and the Customs Act. It does not provide immunity from prosecution under any other Act. For example- if the undisclosed asset has been acquired out of the proceeds of sale of protected animals the person will not be eligible for immunity under the Wildlife (Protection) Act, 1972.
Question No.4: Whether the person making the declaration will be provided immunity from the Prevention of Money Laundering Act, 2002?
Question No.5: Where an undisclosed foreign asset is declared under Chapter VI of the Act and tax and penalty is paid on its fair market value then will the declarant be liable for capital gains on sale of such asset in the future? If yes, then how will the capital gains in such case be computed?
Answer: Yes, the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future. As per the current provisions of the Income-tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. However, since the asset will be taxed at its fair market value the cost of acquisition for the purpose of Capital Gains shall be the said fair market value and the period of holding shall start from the date of declaration of such asset under Chapter VI of the Act.
Question No.6: Where a notice under section 142/143(2)/148/153A/153C of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from voluntary declaration under section 59 of the Act?
Answer: The person will only be ineligible from declaration of those foreign assets which have been acquired during the year for which a notice under section 142/143(2) /148/153A/153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare other foreign assets which have been acquired during other years for which no notice under above referred sections have been issued.
Question No.7: As per section 71(d)(i), declaration cannot be made where an undisclosed asset has been acquired during any previous year relevant to an assessment year for which a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued. If the notice has been issued but not served on the declarant then how will he come to know whether the notice has been issued?
Answer: The declarant will not be eligible for declaration under Chapter VI of the Act where an undisclosed asset has been acquired during any previous year relevant to any assessment year where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued and served on the declarant on or before 30th day of June, 2015. The declarant is required to file a declaration regarding receipt of any such notice in Form 6.
Question No. 8: Where an undisclosed foreign asset has been acquired partly during a previous year relevant to the assessment year which is pending for assessment and partly during other years not pending for assessment then whether such asset is eligible for declaration under Chapter VI of the Act?
Answer: In the case where proceedings are pending before an Assessing Officer in pursuance of a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act served on or before 30-06-2015, the declarant may declare the undisclosed asset under Chapter VI of the Act. However, while computing the amount of declaration the investment made in the asset during the previous year relevant to the assessment year for which such notice is issued needs to be deducted from the fair market value of the asset for which the person shall provide a computation alongwith the declaration. Further, such investment which is deducted from the fair market value shall be assessable in the assessment of the relevant assessment year pending under the Income-tax Act and the person shall inform the Assessing Officer the investment made during the relevant year in such asset. Also to clarify, where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act is issued on or after 30-06-2015, the declarant shall be eligible to declare full value of asset even if such asset (or part of such asset) is acquired in the previous year relevant to the assessment year for which such notice is issued.
Question No.9: Can a declaration be made of undisclosed foreign assets which have been assessed to tax and the case is pending before an Appellate Authority?
Answer: As per section 65 of the Act, the declarant is not entitled to re-open any assessment or reassessment made under the Income-tax 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 the Income-tax Act.
Question No.10: Can a person against whom a search/survey operation has been initiated file
voluntary declaration under Chapter VI of the Act?
Answer:
(a) The person is not eligible to make a declaration under Chapter VI if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. In this case, however, the person is eligible to file a declaration in respect of an undisclosed foreign asset acquired in any previous year in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A
.(b) In case of survey operation the person is barred from making a declaration under Chapter VI in respect of an undisclosed asset acquired in the previous year in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed asset acquired in any other previous year.
Question No. 11: Where a search/survey operation was conducted and the assessment has been completed but the undisclosed foreign asset was not taxed, then whether such asset can be declared under Chapter VI of the Act?
Answer: Yes, such undisclosed asset can be declared under Chapter VI of the Act.
Question No. 12 : Whether a person is barred from voluntary declaration under Chapter VI of the Act if any information has been received by the Government under DTAA?
Answer: As per section 71(d)(iii), 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.
Question No.13: How would the person know that the Government has received information of an undisclosed foreign asset held by him which will make the declaration ineligible?
Answer: The person may not know that the Government has information about undisclosed foreign asset held by him if the same has not been communicated to him in any inquiry / proceeding under the Income-tax Act. After the person has filed a declaration, which is to be filed latest by 30th September, 2015, he will be issued intimation by the Principal Commissioner/Commissioner by 31st October, 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 30th June, 2015 by the Government in respect of such asset the person will be allowed a time up to 31st December, 2015 for payment of tax and penalty in respect of the declared asset. There may be a case where person makes declaration in respect of 5 assets whereas the Government has information about only 1 asset. In such situation the person will be eligible to declare the balance 4 assets under Chapter VI of the Act. In such case the declarant, on receipt of intimation by the Principal Commissioner/Commissioner, shall revise the declaration made within 15 days of such receipt of intimation to exclude the asset which is not eligible for declaration. Tax and penalty on the eligible assets under the Act shall be payable in respect of the revised declaration by 31st of December, 2015. In respect of the ineligible assets provisions of the Income-tax Act shall apply. (Please also see answer to question no. 15)
Question No. 14 : What are the consequences if no declaration under Chapter VI of the Act is made in respect of undisclosed foreign assets acquired prior to the commencement of the Act?
Answer: As per section 72(c), where any asset has been acquired prior to the commencement of the Act and no declaration under Chapter VI of the Act is made then such asset 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. India is expected to start receiving information through Automatic Exchange of Information (AEOI) route under FATCA from USA later in the year 2015. Further, under the multilateral agreement India will start receiving information from other countries under AEOI route from 2017 onwards. As at 18th March 2015, 58 jurisdictions (including India) have committed to share information under AEOI by 2017 and 36 jurisdictions have committed to share by 2018, including jurisdictions which have beneficial tax regime. The multilateral agreement is expected to cover all the countries in the near future. The information under the AEOI will include information of controlling persons(beneficial owners) of the asset. The possibility of discovery of an undisclosed asset may arise at any time in the future; say for example, information of an immovable property can be unearthed if any utility bills/property tax or even gardener's/caretaker's salary has been paid through an existing or closed bank account. Therefore, if any information of an undisclosed foreign asset acquired earlier, say in the year 1975, for $ 100,000 comes to the notice of an Assessing Officer later, say in the year 2020, when its value becomes, say, $ 5 Million, the liability under the Act amounting to 120 percent of the fair market value of the asset on the valuation date may arise in the year 2020, besides prosecution and other consequences. In this case if the valuation date is in the year 2020 the amount of tax and penalty under the Act will be $ 6 Million.
Question No.15: If a declaration of undisclosed foreign asset is made under Chapter VI of the Act and the same was found ineligible due to the reason that Government had prior information under DTAA then will the person be liable for consequences under the Act?
Answer: In respect of such assets which have been duly declared in good faith under the tax compliance but not found eligible, he shall not be hit by section 72(c) of the Act and no action lies in respect of such assets under the Act. However, such information may be used for the purpose of the Income-tax Act.
Question No.16: In respect of the undisclosed foreign assets referred to in answer to question No. 15 above, where the proceedings under the Income-tax Act are initiated, can the options of settlement commission etc. under the Income-tax Act be availed in respect of such assets?
Answer: All the provisions of the Income-tax Act shall be applicable in respect of those assets.
Question No.17: A person has some undisclosed foreign assets. If he declares those assets in the Income-tax Return for assessment year 2015-16 or say 2014-15 (in belated return) then should he need to declare those assets in the voluntary tax compliance under Chapter VI of the Act?
Answer: As per the Act, the undisclosed foreign asset means an asset which is unaccounted/the source of investment in such asset is not fully explainable.Since an asset reported in Schedule FA does not form part of computation of total income in the Income-tax Return and consequently does not get taxed, mere reporting of a foreign asset in Schedule FA of the Return does not mean that the source of investment in the asset has been explained. The foreign asset is liable to be taxed under the Act (whether reported in the return or not) if the source of investment in such asset is unexplained. Therefore, declaration should be made under Chapter VI of the Act in respect of all those foreign assets which are unaccounted/the source of investment in such asset is not fully explainable.
Question No.18: A person holds certain foreign assets which are fully explained and acquired out of tax paid income. However, he has not reported these assets in Schedule FA of the Income-tax Return in the past. Should he declare such assets under Chapter VI of the Act?
Answer: Since, these assets are fully explained they are not treated as undisclosed foreign assets and should not be declared under Chapter VI of the Act. However, if theseassets are not reported in Schedule FA of the Income-tax Return for assessment year 2016-17 (relating to previous year 2015-16) or any subsequent assessment year by a person, being a resident (other than not ordinarily resident), then he shall be liable for penalty of Rs. 10 lakhs under section 43 of the Act. The penalty is, however, not applicable in respect of an asset being one or more foreign bank accounts having an aggregate balance not exceeding an amount equivalent to Rs. 5 lakhs at any time during the previous year.
Question No.19: A person has a foreign bank account in which undisclosed income has been deposited over several years. He has spent the money in the account over these years and now it has a balance of only $500. Does he need to pay tax on this $500 under the declaration?
Answer: Section 59 of the Act provides for declaration of an undisclosed asset and not income. In this case the Bank account is an undisclosed asset which may be declared. Tax on undisclosed asset is required to be paid on its fair market value. In case of a bank account the fair market value is the sum of all the deposits made in the account computed in accordance with Rule 3(1)(e). Therefore, tax and penalty needs to be paid on such fair market value and not on the balance as on date.
Question No. 20: A person held a foreign bank account for a limited period between 1994-95 and 1997-98 which was unexplained. Since such account was closed in 1997-98 does he need to declare the same under Chapter VI of the Act?
Answer: Section 59 of the Act provides that the declaration may be made of any undisclosed foreign asset which has been acquired from income which has not been charged to tax under the Income-tax Act. Since the investment in the bank account was unexplained and was from untaxed income the same may be declared under Chapter VI of the Act. The consequences of non-declaration may arise under the Act at any time in the future when the information of such account comes to the notice of the Assessing Officer.
Question No.21: A person inherited a house property in 2003-04 from his father who is no more. Such property was acquired from unexplained sources of investment. The property was sold by the person in 2011-12. Does he need to declare such property under Chapter VI of the Act and if yes then, what will be the fair market value of such property for the purpose of declaration?
Answer: Since the property was from unexplained sources of investment the same may be declared under Chapter VI of the Act. However, the declaration in this case needs 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 as per Rule 3(2) of the Rules.
Question No.22: A person acquired a house property in a foreign country during the year 2000-01 from unexplained sources of income. The property was sold in 2007-08 and the proceeds were deposited in a foreign bank account. Does he need to declare both the assets under Chapter VI of the Act and pay tax on both the assets?
Answer: The declaration may be made in respect of both the house property and the bank account at their fair market value. The fair market value of the house property shall be higher of its cost and the sale price, less amount deposited in bank account. If the cost price of the house property is higher the declarant will be required to pay tax and penalty on (cost price – sale price) of the house. If the sale price of the house property is higher the fair market value of the house property shall be nil as full amount was deposited in the bank account. The fair market value of the bank account shall be as determined under Rule 3(1)(e) and tax and penalty shall be paid on this amount. (Please also refer to the illustration under Rule 3(3) for computation of fair market value.)Further, it is advisable to declare all the undisclosed foreign assets even if the fair market value as computed in accordance with Rule 3 comes to nil. This may avoid initiation of any inquiry under the Act in the future in case such asset comes to the notice of the Assessing Officer.
Question No.23: A person is a non-resident. However, he was a resident of India earlier and had acquired foreign assets out of income chargeable to tax in India which was not declared in the return of income or no return was filed in respect of that income. Can that person file a declaration under Chapter VI of the Act?
Answer: Section 59 provides that a declaration may be made by any person of an undisclosed foreign asset acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to assessment year 2016-17. Since the person was a resident in the year in which he had acquired foreign assets(which were undisclosed) out of income chargeable to tax in India, he is eligible to file a declaration under section 59 in respect of those assets under Chapter VI of the Act.
Question No.24: A person is a resident now. However, he was a non-resident earlier when he had acquired foreign assets (which he continues to hold now) out of income which was not chargeable to tax in India. Does the person need to file a declaration in respect of those assets under Chapter VI of the Act?
Answer: No. Those assets do not fall under the definition of undisclosed assets under the Act.
Question No. 25: If a person has 3 undisclosed foreign assets and declares only 2 of those under Chapter VI of the Act, then will he get immunity from the Act in respect of the 2 assets declared?
Answer: It is expected that one should declare all his undisclosed foreign assets. However, in such a case the person will get immunity under the provisions of the Act in respect of the two assets declared under Chapter VI of the Act and no immunity will be available in respect of the third asset which is not declared.
Question No. 26: A resident earned income outside India which has been deposited in his foreign bank account. The income was charged to tax in the foreign country when it was earned but the same was not declared in the return of income in India and consequently not taxed in India. Does he need to disclose such income under Chapter VI of the Act? Will he get credit of foreign tax paid?
Answer: Declaration under Chapter VI is to be made of an undisclosed foreign asset. In this case, the person being a resident of India, the foreign bank account needs to be declared under Chapter VI as it is an undisclosed asset and acquired from income chargeable to tax in India. The fair market value of the bank account shall be determined as per Rule 3(1)(e). No credit of foreign taxes paid shall be allowable in India as section 84 of the Act does not provide for application of sections 90(1)(a)/90(1)(b)/90A(1)(a)/90A(1)(b) of the Income-tax Act (relating to credit of foreign tax paid) to the Act. Further, section 73 of the Act does not allow agreement with foreign country for the purpose of granting relief in respect of tax chargeable under the Act.
Question No. 27: Can a person declare under Chapter VI his undisclosed foreign assets which have been acquired from money earned through corruption?
Answer: No. As per section 71(b) of the Act, Chapter VI shall not apply, inter-alia, in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such asset cannot be made under Chapter VI. However, if such a declaration is made and in an event it is found that the asset represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 68 of the Act. If a declaration is held as void, the provisions of the Act shall apply in respect of such asset as they apply in relation to any other disclosed foreign asset.
Question No. 28: If a foreign asset has been acquired partly out of undisclosed income chargeable to tax and partly out of disclosed income/exempt income (tax paid income) then whether that foreign asset will be treated as undisclosed? Whether declaration under Chapter VI needs to be made in respect of such asset? If yes, what amount should be disclosed?
Answer: As per section 5 of the Act, in computing the value of an undisclosed foreign asset any income which has been assessed to tax under the Income-tax Act from which that asset is acquired shall be reduced from the value of the undisclosed foreign asset. Only part of the investment is such foreign asset is undisclosed (unexplained) hence declaration of such foreign asset may be made under Chapter VI of the Act. The amount of declaration shall be the fair market value of such asset as on 1st July, 2015 as reduced by the amount computed in accordance with section 5 of the Act.
Question No. 29: Whether for the purpose of declaration, the undisclosed foreign asset should be held by the declarant on the date of declaration?
Answer: No, there is no such requirement. The declaration may be made if the foreign asset was acquired out of undisclosed income even if the same has been disposed off and is not held by the declarant on the date of declaration.
Question No. 30: Whether at the time of declaration under Chapter VI, will the Principal Commissioner/Commissioner do any inquiry in respect of the declaration made?
Answer: After the declaration is made the Principal Commissioner/Commissioner will enquire whether any information has been received by the competent authority in respect of the asset declared. Apart from this no other enquiry will be conducted by him at the time of declaration.
Question No. 31: A person is a beneficiary in a foreign asset. Is he eligible for declaration under section 59 of the Act?
Answer: As far as ownership is concerned, as per section 2(11) of the Act "undisclosed asset located outside India" means an asset held by the person in his name or in respect of which he is a beneficial owner. The definition of "beneficial owner" and "beneficiary" is provided in Explanation 4 and Explanation 5 to section 139(1) of the Income-tax Act, respectively (which is at variance with the determination of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005). Therefore, for the purpose of the Act "beneficial owner" in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. Further, "beneficiary" in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. Therefore, as per the Act the beneficial owner is eligible for declaration under section 59 of the Act. There may be a case where a person is listed as a beneficiary in a foreign asset, however, if he has provided consideration for the asset, directly or indirectly, he will be covered under the definition of beneficial owner for the purposes of the Act.
Question No. 32: A person was employed in a foreign country where he acquired or made an asset out of income earned in that country. Whether such asset is required to be declared under Chapter VI of the Act?
Answer: If the person, while he was a non-resident in India, acquired or made a foreign asset out of income which is not chargeable to tax in India, such asset shall not be an undisclosed asset under the Act. However, if income was accrued or received in India while he was non-resident, such income is chargeable to tax in India. If such income was not disclosed in the return of income and the foreign asset was acquired from such income then the asset becomes undisclosed foreign asset and the person may declare such asset under Chapter VI of the Act.
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