Corrupt individuals will not be eligible to declare their black money under compliance window that kicks off from June 1, said the Central Board of Direct Taxes (CBDT) on Friday.

“As per section 196(b) of the Finance Act, 2016, the Income Disclosure Scheme shall not apply in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988,” it said, adding that said such declarations will not be acceptable.

The Income Disclosure Scheme will begin from June 1, 2016 for a period of four months and will allow persons with undisclosed income in the country to come clean by paying tax, penalty and surcharge of 45 per cent of fair market value.

The CBDT has issued a set of Frequently Asked Questions to explain how and where the provisions of this new scheme can be applied.

The declaration will, however, be held void if the declarant fails to pay the entire amount of tax, surcharge and penalty within the four month window or suppresses any facts.

It has further explained that the scheme will also not apply to persons to whom the Income Tax Department has sent a notice or initiated a search or survey operation or cases that are pending before an appellate authority. However, persons who have declared only a part of their undisclosed income can also use the window to declare the rest of the undisclosed income.

Capital gains tax The CBDT has also said a declarant will be liable to pay capital gains tax on the sale of any asset declared under the compliance scheme.

“Since the asset will be taxed at its fair market value, the cost of acquisition for the purpose of capital gains shall be the fair market value as on June 1, 2016, when the period of holding shall start,” it said.

Effect of valid declaration Promising to keep details of the declaration confidential, the CBDT in a separate circular also said the disclosed income will not be used as evidence for penalty or prosecution under the Income Tax Act and Wealth Tax Act. Further, the income will have immunity from the Benami Transactions (Prohibition) Act, 1988 and will not be chargeable to any further wealth tax or income tax.

“Declaration of undisclosed income will not affect the finality of completed assessments,” it further said.