Black is the New White: Black Money Law

• India moved a step closer to a harsher regime for those hiding wealth overseas with the government introducing legislation in Parliament that makes such concealment a criminal offence.
• Tax advisors, financial advisors, banks or financial institutions caught aiding any Indian in stashing black money overseas will also face jail terms of up to seven years under the Undisclosed Foreign Income & Assets (Imposition of New Tax) Bill, which proposes a short compliance window for those having foreign assets to come clean.
• Safeguards include making notices mandatory and granting people the opportunity to be heard. Appeals to the Income-Tax Appellate Tribunal, high courts and the Supreme Court will be allowed in this regard.
• The Bill also empowers the government to enter into agreements with other countries or jurisdictions for exchange of information, recovery of tax and avoidance of double taxation.
• Under the proposed measure, tax authorities have been vested with powers of discovery and inspection, issue of summonses, enforcement of attendance, production of evidence and impounding of books of account and documents.
• India has offered a “cash reward” to a former HSBC bank employee-turned-whistleblower in exchange for any fresh information about its citizens holding illegal accounts in various tax haven countries, including in Swiss banks, as it looks to combat black money and unearth funds stashed away abroad.

Punishment

• Undisclosed foreign income or assets will be taxed at a flat 30%, besides a 90% penalty under the proposed law.
• The punishment for wilful attempts to evade tax in relation to foreign income or an asset located outside India will be rigorous imprisonment from three to 10 years besides a fine.
• The failure to furnish a return or an inaccurate disclosure in respect of foreign assets and bank accounts or income will be punishable with rigorous imprisonment for a term of six months to seven years besides a fine of Rs 10 lakh.
• Second and subsequent offences will be punishable with rigorous imprisonment for a term of three to 10 years with a fine of Rs 25 lakh to Rs 1 crore.