Finance Minister Arun Jaitley on Monday gave black money hoarders the last opportunity to come clean. The amendment he introduced to the Income Tax law provides for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.
For those hoarders who choose to deposit their undeclared income the government has proposed to levy a total tax, penalty and surcharge of 50% on the amount deposited after November 8 announcement of demonetisation while higher taxes and stiffer penalty of up to 85% await those who dont disclose but are caught.
Introduced nearly 3 weeks after the demonetisation announcement, the amendment directs black money declarants to invest 25% of the undisclosed amount in anti-poverty schemes without interest and with a lock in period of 4 years.
50 per cent tax to be levied:
If hoarders want to deposit black money stashed in demonetised Rs 500 and Rs 1,000 notes in Pradhan Mantri Garib Kalyan Yojana 2016, tax of 30% will be levied on the undisclosed amount. There will also be an additional 10% penalty on the undisclosed income and surcharge called PMGK Cess at the rate of 33% of tax. The declarants will also have to invest 25% of the undisclosed amount in a scheme yet to be notified by the government.
If you thought that was taxing, it gets worse for those who choose not to declare their black money get caught. The current law will be amended to make way for the government to levy a straight 60% tax plus a surcharge of 25% tax making it an additional 15%. All in all 75% will be the deduction on amounts that are not disclosed. If income tax officer will also be empowered to levy an additional 10% tax.
The new amendment makes no change to the current provision of penalty on under-reporting of income at 50% of tax and misreporting of income at 200% of tax. For black money hoarders this seems to be the only opportunity to declare and lose some or don't declare and lose all.