A CLOSER LOOK AT BLACK MONEY & NON RESIDENTS

Shedding Light On Black Money & Non Residents

The Black Money (Undisclosed foreign Income and Assets) and imposition of Tax Act 2015 (BMA) was born after the Apex Court expressing concern over the issue of Black Money and recognising the limitation of existing legislations to resolve the problem. The main object of this legislation is to deal with problem of Black Money held outside India by person resident in India who have stashed away their Black Money abroad with the intent to evade tax. In this blog, here is some insight on Black Money & Non Residents:

Key Provisions:

• Applicable to non-residents and non-ordinary residents who were resident in India either in the year to which the undisclosed income relates to or undisclosed foreign assets was acquired besides the person who are resident in India.
• Undisclosed foreign assets should have 4 characteristics:

(i)     The should be as assets including financial interest in any entity; and

(ii)     It must be outside India; and

(iii)    It is held by the person in his own name or in respect of which he is the beneficial owner; and

(iv)   He has no explanation to offer about the investment of such assets or unsatisfactory explanation.

• This Act is retrospective as it covered undisclosed foreign assets acquired before the commencement of this Act i.e. 1st April, 2016 but still exist as the fair market value undisclosed foreign assets shall be deemed as income of the assesse in the year in which such undisclosed foreign assets comes to the notice of the tax authorities.
  
• Once the income of assesse is included in the total undisclosed foreign assets and income under this Act, it shall not form part of total income under Income Tax Act.
  
• Consequences under this Act shall be:

(i)     Tax at 30% on value of undisclosed foreign assets and Income; and

(ii)    300%of tax mandatory penalty; and

(iii)   Punishment from 6 months to 10 years based on offence under this Act.

• Other consequences shall be:

(i)     Presumption as to culpable mental state;

(ii)    No foreign tax credit; and

(iii)   No compounding of punishment; and

(iv)    No settlement route available;

• Interlinking with other punitive legislations:

(i)     Offence of willful attempt to evade tax, penalty or interest under BMA included in Part-C of Schedule to Prevention of Money Laundering Act (PMLA) so as to initiate investigation into offence of money laundering.

(ii)    New provision has been added in Foreign Exchange Management Act (FEMA) which provides seizure of Indian assets equivalent to value of foreign, foreign securities or immovable properties situated outside India in contravention of provision of Section-4 of FEMA.

(iii)   Offence of willful attempt to evade tax, penalty or interest under BMA included in Scheduled offence under Fugitive Economic Offenders Act, 2018 (FEOA) which may lead to attachment of Indian Properties and other extremely harsh consequences.

Source Of Information

Tax jurisdictions all over the world are extremely committed in sharing financial and tax information almost on a real time basis. India has entered into various agreements and become part of many international organizations who are working relentlessly to discover and share information under Exchange of Information agreement both bi-lateral and multi-lateral. Indian Government after enacting BMA is working to process the information received from various tax jurisdictions by using state of Art technologies like data analytics, artificial intelligence, Block chain etc. Now, it becomes almost impossible to conceal any economic interest outside India and evade tax payable in India. The relationship between Black Money and Non Residents also play important role in collecting information under this Act.

 Concluding Remarks

The legislation, Black Money Act, with most stringent provisions has been enacted to curve the menace of black money. The results of first five years are quite encouraging. Now the time will tell how this legislation will achieve the objects to unearth black money especially with reference to Black Money & Non Residents.

(Disclaimer: This content is meant for our clients or professional friends only for stimulating discussion on the subject matter not to frame any commercial opinion. All efforts are made to compile correctly with no guarantee of extreme accuracy)

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