As a last resort measure for black money hoarders to come clean and pay a lesser amount of tax, the government has introduced the ‘Taxation & Investment Regime for Pradhan Mantri Garib Kalyan Yojana 2016’ under the ‘The Taxation Laws (Second Amendment) Bill, 2016’.

The main features of this scheme u/s 199C are:

1)     The declarant makes a voluntary declaration of his undisclosed income in the form of cash or bank deposit before 1.4.2017

2)     Tax Implications on the undisclosed Income will be –

The tax will be @ 30% of undisclosed income plus 33% surcharge on tax payable plus 10% penalty on undisclosed income i.e. Total tax will be 49.9% of undisclosed income.

3)     The declarant will also have to deposit 25% of the undisclosed income in Pradhan Mantri Garib Kalyan Deposit Scheme 2016. The deposit will not earn any interest. This deposit may be withdrawn only after four years from the date of deposit.

4)     Hence, on declaration under this scheme, only 25% will be available for the assesse to withdraw.

Any amount declared under this scheme will be treated as separate income of the assesse, with separate section u/s 199C on taxation. This will not be included in the total income of the assesse. Also, no deductions w.r.t expenses, losses or set-offs will be allowed against this.

The declarations of undisclosed income made under the Yojana will not be used as evidence under provisions of any other law, except in the following:

(i)                the Prohibition of Benami Property Transactions Act, 1988,

(ii)              the Prevention of Money Laundering Act, 2002,

(iii)            the Unlawful Activities (Prevention) Act, 1967,

(iv)             the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015,

(v)               the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

Procedure to declare and file under the Yojana:

1.      Tax, Surcharge and Penalty must be paid before declaration u/s 199C

2.      Deposit u/s 199F in Pradhan Mantri Garib Kalyan Deposit Scheme 2016 must be made before declaration u/s 199C

3.      Declaration should be made along with the proofs for payment of Tax, Surcharge and Penalty.

What happens if the assesse does not declare under Yojana and is caught by the Tax Department for having undisclosed income?

If a person having black money, does not disclose the income under Yojana and is caught by the ITD, the following are the implications

1)     Tax u/s 115BBE @ 60% of undisclosed income plus 25% surcharge on tax payable plus 10% penalty u/s 271AAC on tax payable i.e. Total tax will be 82.5% of undisclosed income.

Further, the ITD may initiate search and seizure proceedings in case of suspicion of black money hoardings. The Section 271AAB has also been amended to increase the penalty on any undisclosed income seized during Search & Seizure proceedings which is levied in addition to the tax payables.

30% penalty on undisclosed income if tax payer admits holding such income.

60% penalty on undisclosed income if tax payer does not admit to holding such income.

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