Compliance window under Black Money Act

The Hon'ble Finance Minister in his budget speech for 2015-16 had proposed introduction of Black Money Bill in the Parliament. The Bill was passed by the Parliament in its budget session. The Bill received the assent of the President on May 26, 2015 and it became the law. It is to be called as "The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015" ("the Black Money Act"). It has been clarified by the Government that such Black Money Act would be applicable from July 1, 2015.

How to come clean under Compliance window Make declaration of foreign asset or income on or before Sept 30, 2015. Person making declaration has to pay penalty and taxes on or before Dec 31, 2015. When Compliance window is not available? If any information about the foreign asset or income has been received by the Govt. on or before June 30, 2015. Benefits of Compliance window Pay reduced penalty of 100% of tax. Get immunity from prosecution. Contents disclosed in the declaration are not admissible as evidence against the declarant in any penalty/ prosecution proceedings under the Income-tax Act, FEMA, the Companies Act or the Customs Act.

The Black Money Act provides for 30% tax on the value of undisclosed foreign income or assets with a penalty equivalent to three times of tax so computed. It further provides for prosecution of up to 10 years in case of willful attempt to evade tax on foreign income or assets held outside India. The Black Money Act provides for compliance window, i.e., one-time opportunity for taxpayers to voluntarily disclose the undisclosed foreign income or assets. Any person who opts for this compliance window shall be liable to pay reduced penalty of 100% of tax and would also get immunity from prosecution. Recently, the Government has notified Rules for Black Money law and issued a circular explaining substance of provisions of compliance window.

Declaration under compliance window can be made during the period from July 1, 2015 to September 30, 2015. However, a person will not be eligible to obtain benefit of compliance window if any information regarding undisclosed foreign asset or income has been received by competent authority on or before June 30, 2015. Thus, taxpayers on HSBC list might be denied benefit of compliance window.

Provisions relating to compliance window in questions and answer format have been given in following paras.

Q. How to avail benefit of compliance window?

A declaration of undisclosed foreign asset or income can be made by a person who is resident and ordinary resident in India under the income-tax Act. Declaration can be made in 'Form 6' on or before September 30, 2015.

Any person availing of benefit of compliance window is required to pay taxes at the rate of 30% of value of undisclosed asset and a further penalty of 100% of tax. Such taxes and penalty are required to be paid by declarant on or before December 31, 2015.

Q. Where to file declaration?

The declaration may be filed with the Commissioner of Income-tax, Delhi. The declaration may also be filed on the e-filing website of the Income-tax department using the digital signature of the declarant.

Q. Who are authorized to sign the declaration?

S. No.	Status of declarant	Declaration to be signed by
1.	Individual	- Individual, or - Any person authorized by individual (if individual is absent from India), or - Guardian or any other person competent to act on his behalf (if individual is mentally incapacitated).
2.	HUF	- Karta, or - Any other adult member of Karta (If Karta is absent from India or is mentally incapacitated from attending to his affairs)
3.	Company	- Managing Director, or - Any director (if for any unavoidable reason the managing director is not able to sign or there is no managing director)
4.	Firm	- Managing partner, or - Any partner not being a minor (If for any unavoidable reason the managing partner is not able to sign the declaration, or where there is no managing partner)
5.	Any other association	- Any member of the association or the principal officer.
6.	Any other person	- That person or by some other person competent to act on his behalf.

Q. Who are not eligible to make declaration?

Following persons shall not be eligible to make declaration under the Black Money Act:

(1) A person against whom proceedings for prosecution are pending in respect of offences relating to public servants under Chapter IX of the Act;

(2) A person against whom proceedings for prosecutions are pending in respect of offences against property under the Indian Penal Code;

(3) A person against whom proceedings in respect of unlawful activities are pending;

(4) A person against whom proceedings for Prevention of Corruption Act are pending.

Q. Circumstances where declaration shall be invalid

In following situations, a declaration shall be void and shall be deemed to have never been made:

(1) If the declarant fails to pay the entire amount of tax and penalty on or before December 31, 2015.

(2) Where the declaration has been made by misrepresentation or suppression of facts or information.

Where the declaration is held to be void for any of aforesaid reasons, then declarant would be liable to pay penalty three times of tax and will also be liable for prosecution.

Q. Circumstances where a declaration cannot be made

No declaration under the compliance window can be made in respect of any undisclosed foreign assets which have been acquired from income chargeable to tax under the income-tax Act for assessment year 2015-16 or any other earlier assessment year in the following cases:

 (1) If any information regarding undisclosed foreign asset or income has been received by the Government on or before June 30, 2015.

(2) Where a notice under section 142 or Section 143(2) 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. (The person will not be eligible under the compliance window if any of the above notices has been served on or before June 30, 2015);

(3) Where a search has been conducted or requisition has been made or a survey has been carried out under the Income-tax Act (If time for issuance of notice under Sections 143(2), 153A and 153C has not expired.)

Q What will be the effect of valid declaration?

Following would be the effects of valid declaration:

(1) The amount disclosed under this scheme shall not be included in the total income of the declarant under the Income-tax Act for any assessment year;

(2) The contents disclosed in the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the Income-tax Act, the Wealth Tax Act, the Foreign Exchange Management Act, the Companies Act or the Customs Act.

(3) The value of assets declared in the declaration shall not be chargeable to wealth tax for any assessment year.

(4) Declaration of undisclosed foreign asset will not affect the finality of completed assessments. However, the declarant will not be entitled to re-assessment for any earlier year or revision of any order or any benefit or set off or relief in any appeal or proceedings under the Act or under Income-tax Act in respect of undisclosed asset located outside India now declared through compliance window or any tax paid thereon.

 Ref:- Taxmann publication