Revisions introduced in taxation laws in India

Providing a wider window to black money holders

Business & Politics

December 1, 2016

/ By / New Delhi



According to the new bill, a tax of 60 pc will be charged on undisclosed income, investment or cash credit deposited in the banks

According to the new bill, a tax of 60 pc will be charged on undisclosed income, investment or cash credit deposited in the banks

After the Indian government demonetised INR 500 and INR 1,000 currency bills last month to grapple with the circulation of black money in the country, people in India found new ways to hide their undeclared earnings. Thus, in the wake of demonetisation and corruption, the government on Tuesday passed a new amendment in the taxation laws.

After demonetisation of currency notes of INR 500 and INR 1,000, and introducing a new series of systems and rules, the government has come up with another law that was passed on November 28 by the Lok Sabha (lower house of parliament).

As a move to further reduce the circulation of black money, Lok Sabha passed the Taxation Laws (second Amendment) Bill, 2016, even after a great deal of resistant slogan shouting and rally by the opposition parties.

According to the new bill that was suggested by Indian Finance Minister Arun Jaitley on Monday, a tax of 60 pc will be charged on undisclosed income, investment or cash credit deposited in the banks. Also, the declarants will have to pay 15 pc of such income, resulting in a total tax amounting to around 75 pc.

The amendments also provide a power to the assessing officer to increase the penalty of the total cess by 10 pc in case of unexplained or concealed income.

Along with this, the government has also announced an income disclosure scheme called the Pradhan Mantri Garib Kalyan Yojana (Prime Minister’s welfare for poor scheme) 2016, under which people can deposit money in their accounts till April 1 next year by paying 50 pc of the total amount, as a tax and penalty. Additionally, 25 pc of the amount will stay with the bank for four years in interest-free scheme and the depositor cannot use it.

“The clause of 25 pc lock-in period for four years will give a boost to the financial sector. A lot of unaccounted money will come through this. With 50 pc tax and 25 pc locked in, it leaves only 25 at their disposal,” said the Finance Ministry.

However, those who are prosecuted under the Narcoctics Act, Prevention of Money Laundering Act, or for holding proxy properties and smuggling offences, cannot deposit their hidden income under this scheme.

“This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood,” the Finance Ministry added.

In case of undeclared income found during income tax raids, a penalty of 30 pc will be imposed apart from the regular tax on the money.

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