Source: ET
Context:
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), one of India’s strictest tax laws, is under review by an internal government committee. The panel will examine challenges in enforcement, conflicts with the Income Tax Act, and explore ways to handle undisclosed foreign assets more effectively.
Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA)
Objective:
- To combat black money stashed abroad by Indian residents.
- To tax undisclosed foreign income and assets and impose penalties for non-compliance.
Key Features:
| Aspect | Details |
|---|---|
| Scope | Applies to income or assets held outside India by:- Indian residents- Citizens of India- Entities controlled by Indian residents |
| Taxation | Undisclosed foreign income/assets taxed at 30% plus applicable surcharge and cess. Additional penalties and prosecution may apply in serious cases. |
| Penalty | Penalty can be equal to tax payable on undisclosed foreign income/assets. Additional penalties may apply for concealment or failure to report. |
| Voluntary Disclosure / Compliance | Government provides Voluntary Disclosure Schemes (VDS) periodically:- Allows taxpayers to disclose undisclosed foreign income/assets- Pay tax and penalty- Avoid prosecution |
| Prosecution | Willful concealment or misreporting is a criminal offense:- Imprisonment: 3 to 10 years- Fines: As per the Act |
| Reporting Requirements | Individuals and entities must report foreign income and assets in annual income tax returns. Compliance is strictly enforced with cross-checking of foreign data. |
Controversial Provisions:
- Retroactive Applicability:
- The BMA allows the I-T department to probe undisclosed foreign assets acquired decades ago.
- Under Section 72(c), the year the tax department discovers the asset is considered the year of income, bypassing usual time-barring provisions under the I-T Act.
- By contrast, under the I-T Act, the department can go back 5 years if escaped income ≥ ₹50 lakh, and 3 years if less.
- Heavy Tax & Penalties:
- 30% tax + 90% penalty on undisclosed foreign assets, totaling 120% of asset value, compared with 90% maximum under I-T Act.
- Prosecution for Non-Reporting:
- Under the BMA, failure to report a foreign asset—even if legitimately acquired—can trigger prosecution.
- Under the I-T Act, prosecution applies only for tax evasion, not mere non-reporting.
- Link with PMLA:
- Tax assessed under the BMA is treated as a scheduled offence under the Prevention of Money Laundering Act, allowing Enforcement Directorate (ED) intervention.
