The Modi-led Government on Monday sought to bring to tax all unaccounted money that was flowing into the banking system following the demonetisation announcement on November 8.
Finance Minister Arun Jaitley introduced a Bill in Lok Sabha for this purpose.
The Centre has now come out with Pradhan Mantri Garib Kalyan Yojana 2016 to enable people with undisclosed income to come clean.
However, they would have to fork out a tax of 30 per cent and penalty of 10 per cent. A surcharge in the form of cess of 33 per cent will have to be paid on the tax.
In addition to tax, surcharge and penalty, the declarant will have to deposit 25 per cent of undisclosed income in a deposit scheme to be notified by the Centre in consultation with the RBI.
This amount is proposed to be utilised for programmes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood etc, so that there is justice and equality.
A 75 per cent tax and 10 per cent penalty in case Income Tax authorities detect undisclosed wealth deposited post demonetisation.
The current provisions of penalty on under-reporting of income at 50 per cent of the tax, and misreporting (200 per cent of tax) will remain and no changes are being made to them.
Under-reporting/misreporting income is normally difference between returned income and assessed income.
The Taxation Laws (Second Amendment) Bill, 2016 proposes to amend Section 115BBE of the Income Tax Act to provide for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.
Against current provision of 30 per cent flat tax rate plus surcharge and cesss, a steep 60 per cent tax will be levied on such income together with 25 per cent surcharge of tax (15 per cent of such income). So total incidence of tax will be 75 per cent with no expense, deductions or set-off allowed.
Also, the assessing officer can levy an additional 10 per cent penalty, taking the total tax incidence to 85 per cent.
The current provisions for penalty in cases of search and seizure are proposed to be amended to provide for a penalty of 30 per cent of income if it is admitted, returns filed and taxes paid. In all other cases, 60 per cent will be the penalty.
Currently, the penalty is 10 per cent of the income, if the income is admitted, returned and taxes are paid. Penalty is at 60 per cent in all other cases.
Under the new Pradhan Mantri Garib Kalyan Yojana, besides 50 per cent tax, surcharge and penalty, a quarter of the declared income will be to be deposited in interest free deposit scheme for four years.
Revenue Secretary Hasmukh Adhia said the deterrent provisions were necessary so that people have the fear of hoarding black money.
“The disclosures in PMGKY scheme will ensure that no questions will be asked about the source of fund. It would ensure immunity from wealth tax, civil laws and other taxation laws. But there is no immunity from FEMA, PMLA, Narcotics, and black money act,” he said.
Deposits which have been already made from November 10 will be covered under PMGKY. “Last date we will notify after the bill is passed but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016,” he said.
(With additional inputs from PTI)