THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME
AND ASSETS) AND IMPOSITION OF TAX ACT, 2015
Introduced in Lok Sabha on 20.03.2015, passed by
Rajya Sabha on 13.05.2015 and received the assent
of President on 26.05.2015
BUDGET SPEECH
One of the policy direction of budget speech of FM was to take measures to curb
black money. Para 100 to 104 of budget speech was devoted on this aspect.
Consequence thereto, the present Act is made
PRESENT LAW
4th proviso to sec. 139
A resident even if not required to file return but has any asset outside India or
signing authority in an account out of India is required to file return
Sec. 149(1)(b)
Sec. 148 action upto sixteen years
APPLICABILITY AND OBJECT
APPLICABILITY
Applicable from 01.04.2016 (7 Chapters, 88 Sections)
OBJECTIVES
 To tax undisclosed foreign income and assets acquired from undisclosed foreign
income
 To punish the persons indulging in illegitimate means of generating money
causing loss to the revenue
 To prevent illegitimate income and asset kept outside India from being utilized
in ways which are detrimental to India’s social, economic and strategic interests
and its national security
SALIENT FEATURES
Undisclosed foreign income and assets of an ordinary resident would be taxed
under this Act and not under the normal provisions of IT Act, 1961.
 No 16 year time-limit to tax foreign income/asset escaping assessment
 Flat 30% tax on total undisclosed foreign income and asset (no surcharge or
education cess)
 No wealth tax. Interest as per sec. 40 of the Act
 Penalty up to 3 times of tax computed
 One-time limited window compliance scheme – levy of tax, lower penalty of
upto 100% of tax computed and no prosecution
WHO IS LIABLE TO PAY TAX?
 In case of an individual or HUF who are resident and ordinarily resident shall be
liable to pay tax (‘Assessee’)
 Meaning of ‘resident’ and ‘ordinarily resident’ shall be as per provisions of sec. 6
of IT Act
 Assessee means a person by whom tax on Undisclosed foreign income and asset
is payable and includes every person who is deemed to be an assessee-in-default
under IT Act
WHAT IS UNDISCLOSED FOREIGN INCOME AND ASSET
 Undisclosed foreign income and asset means
 Foreign income which is not disclosed in the ROI furnished (original, revised
or belated)
 Foreign income in respect of which return is required to be furnished u/s 139
but no return has been furnished
 value of an undisclosed foreign asset (FMV of the undisclosed foreign asset)
 Undisclosed foreign asset
 It is an asset (including financial interest in any entity) located outside India
 Assessee may be owner or beneficial owner of such an asset
 Assessee has no explanation about the source of investment in such asset or
explanation given by him in the opinion of AO is unsatisfactory
 Undisclosed foreign asset shall be charged to tax on its value in the P.Y. in
which such asset comes to the notice of the AO
WHAT IS EXCLUDED FROM UNDISCLOSED FOREIGN INCOME
 Any variation in foreign income during assessment or re-assessment under
following provisions of IT Act shall not be included in undisclosed foreign income
 Sec. 29 to 43C – Assessment of business profit
Sec. 57 to 59 – Assessment of income from other sources
 Sec. 92C – Transfer pricing provisions
 We can understand this from following examples
Example 1 – Assessee acquires a house property in a foreign country which is
not disclosed in the ROI.
The FMV of such an asset shall be subject to tax under this Act. Any income
earned from such property which is not offered to tax in ROI shall also be
charged to tax under this Act
WHAT IS EXCLUDED FROM UNDISCLOSED FOREIGN INCOME
Example 2 – Assessee acquires a house property in a foreign country and discloses
in the ROI. Any income earned from such property during the year is offered to
tax in ROI.
In this case, nothing would be taxable under the Act. However, if assessee
transfers the property during the year and suppresses the FVOC and during
assessment, AO assesses the capital gain or income from house property at a
higher sum, additional sum so assessed shall be chargeable to tax under this Act.
Example 3 – Assessee acquires a house property in a foreign country and discloses
it in ROI.
In this case, nothing would be taxable under the Act. However, if assessee earns
income from such property during the year but does not offer it to tax in the ROI,
in this case, if AO assesses the income from house property, the sum so assessed
shall be chargeable to tax under this Act
COMPUTATION MECHANISM
 No deduction in respect of any expenditure or allowance or set off of any loss
shall be allowed.
 Any income which has been assessed to tax under IT Act shall be reduced from
the value of undisclosed foreign asset if asset is acquired from such income
 Proportionate income, which was assessed to tax, shall be reduced from FMV of
foreign undisclosed asset being immovable property and remaining amount
shall be taxable under the Act
 Example = A house property located outside India acquired by the assessee in
P.Y. 09-10 for = Rs. 50 lacs, Out of investment of Rs.50 lacs, 20 lacs was assessed
to tax in total income of P.Y. 09-10 and earlier years. Such undisclosed asset
comes to notice of AO in year 2017-18. If value of asset in year 17-18 is Rs. 1 crore,
the amt. chargeable to tax is = Rs. 60 lacs [Rs.100 lacs – Rs.40 lacs (Rs.100
lacs*Rs.20 lacs/Rs.50 lacs)]
TAX AUTHORITIES
 The income tax authorities specified in sec. 116 of the IT Act shall be the tax
authorities for the purpose of this Act.
 Tax authority in relation to an assessee who has no income assessable to income
tax under the IT Act shall be the tax authority having jurisdiction in respect of the
area in which the assessee resides or carries on its business or has its principal
place of business
 The prescribed tax authorities shall have the same powers as are vested in a
Court under the Code of Civil Procedure, 1908.
 For the purpose of making any inquiry or investigation, the prescribed tax
authority shall be vested with the powers whether or not any proceedings are
pending before it.
 Any proceedings under the Act before a tax authority shall be deemed to be a
judicial proceeding
 Every tax authority shall be deemed to be a civil court
ASSESSMENT & APPEAL
 The AO on receipt of information from an IT authority under the IT Act or any other
authority under any law or on coming of any information to his notice, serve on any person,
a notice requiring to produce such accounts or documents or evidence as he may require
 No order of assessment or reassessment shall be made after expiry of 2 years from the
end of F.Y. in which notice was issued by the AO.
 The order passed may be amended by the tax authority so as to rectify any mistake
apparent from record within a period of 4 years from the end of the F.Y. in which the order
was passed.
 Any sum payable in consequence of any order shall be demanded by the tax authority by
serving upon the assessee a notice of demand
 Direct assessment of person on whose behalf or for whose benefit the undisclosed
income from a source located outside India is receivable or undisclosed asset located
outside India is held or recovery from such person is not barred
 Right of appeal has been protected by providing for appeals to CIT(A), ITAT, HC and SC
 Notwithstanding any appeal preferred to the HC or SC, tax shall be paid in accordance
with the assessment made under this Act
PENALTIES AND PROSECUTIONS
Nature of default
Penalty
Prosecution
Where tax has been computed in respect of 3 times of tax undisclosed foreign income and asset [Sec. 41]
computed
Failure to furnish ROI before the end of the relevant Rs. 10 lacs
A.Y. in relation to foreign income and asset [Sec.
42]
6 months to
7 years and
with fine
Failure to furnish any information or furnishing of
inaccurate particulars relating to any asset located
outside India or income from a source outside India
in the return furnished [Sec. 43]
6 months to
7 years and
with fine
Rs. 10 lacs
[No penalty u/s 42 & 43 shall be levied if any
foreign asset, being one or more bank account have
an aggregate balance which does not exceed Rs. 5
lacs at any time during the P.Y.]
Default by an assessee in making payment of tax
and in case of continuing default by such assessee
[Ne cessation of penalty merely by reason that
before the levy of penalty assessee has paid the tax]
[Sec. 44]
Amt. of tax
arrear
Nature of default
Penalty
Prosecution
If a person fails to:Rs. 50,000
-Answer any question put to him by a tax authority
to Rs. 2 lacs
- sign any statement which a tax authority may legally
require him to sign
- attend or produce books of accounts or documents
[Sec. 45]
Willful attempt by assessee to evade tax, penalty or interest chargeable or imposable under this Act
[Sec. 51]
3 years to 10 years
and fine
Willful attempt by person to evade tax, penalty or interest chargeable or imposable under this Act
[Sec. 51]
3 months to 3 years
and fine
If a person makes false statement in any verification under
this Act or delivers false account or statement
[Sec. 52]
-
6 months to 7 years
and fine
If a person abets or induces another person to make and
deliver an account or statement or declaration relating to tax
payable under this Act which is false [Sec. 53]
-
6 months to 7 years
and fine
If any person convicted of an offence is again convicted of
an offence [Sec. 58]
-
3 years to 10 years
and fine = Rs. 5
lacs to 1 crore
ONE TIME COMPLIANCE OPPORTUNITY
The Act provides for one time compliance opportunity during the specified period
to persons who have any undisclosed foreign asset. However, the govt. has refused
to call it as amnesty scheme as no immunity from penalty is offered (although
lower penalty is charged) and only immunity from prosecution is offered.
Any person may make a declaration in respect of any undisclosed asset located
outside India and acquired from income chargeable to tax under IT Act for any
A.Y. prior to A.Y. 16-17
Tax @30% on value of such undisclosed asset as on the date of commencement
of this Act shall be charged and penalty @100% of such tax would be levied.
Declaration to be made to Principal Commissioner or Commissioner in such
form and verified in such manner as may be prescribed
Tax and penalty payable shall be paid on or before a date to be notified by CG.
If the declarant fails to pay the tax in respect of declaration, the declaration filed
shall be deemed never to have been made.
ONE TIME COMPLIANCE OPPORTUNITY
Tax and penalty paid shall not be refundable
No interest u/s 234A, 234B and 234C of IT Act
Declaration by misrepresentation or suppression of fact shall be deemed as
void-ab-initio
 Declaration so filed shall not be considered as an evidence against declarant for
initiating penalty or prosecution proceedings under the IT Act, WT Act, FEMA
Act, Companies Act or Custom Act
No wealth tax shall be levied in respect of asset disclosed in declaration form.
Further, where a declaration is made by a firm, assets so declared shall not be
taken into account in computing the net wealth of any partner or in determining
the value of interest of any partner in the firm.
 Only one declaration can be made
PERSONS NOT ENTITLED TO AVAIL OF ONE TIME
COMPLIANCE OPPORTUNITY
 Any person in respect of whom an order of detention has been made under the
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act,
1974
Any person who is subject to prosecution for any offence which is punishable
under Chapter IX or Chapter XVII of Indian Penal Code, Narcotic Drug Act, 1985,
Unlawful Activities (Prevention) Act, 1967, Prevention of Corruption Act, 1988
 Any person notified under sec. 3 of Special Court Act, 1992
Any person against whom notice of assessment has already been issued under
the IT Act and proceeding is pending before tax authority
 Any person against whom the time-limit for furnishing of notice of assessment
has not expired pursuant to search, requisition or survey, as the case may be,
carried out under IT Act
 Any person against whom information has been received under DTAA in
respect of such undisclosed asset (in case of undisclosed bank account, it may or
may not have any balance)
AGREEMENT WITH FOREIGN COUNTRY
The Central Government may enter into an agreement with the government of any
country or specified territory
 to avoid double taxation
 for exchange of information for prevention of evasion or avoidance of tax on
undisclosed foreign income
 for investigation of cases of evasion or avoidance of tax on undisclosed foreign
income
 for recovery of tax
 for carrying out any other purpose
MANNER OF SERVICE OF NOTICE, SUMMONS,
REQUISITION, ORDER ETC.
The above may be furnished to the person named therein by any of the following
modes: Post
 Courier
 Fax Message
 E-mail
MISCELLANEOUS
 All information contained in any statement or return made or furnished under
the IT Act or obtained or collected for the purpose of the said Act may be used for
the purpose of this Act
 The Act provides for inclusion of offence of tax evasion as a scheduled offence
under PMLA
Thank You
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