Explanatory notes on provisions relating to tax compliance for undisclosed foreign income

Circular No. 12 of 2015

 F. No. 142/18/2015-TPL

 Government of India

Ministry of Finance

 Department of Revenue

Central Board of Direct Taxes

 (TPL
Division)

 ***

Dated 2^nd of July, 2015

EXPLANATORY
NOTES ON PROVISIONS RELATING TO TAX COMPLIANCE FOR UNDISCLOSED FOREIGN INCOME
AND ASSETS AS PROVIDED IN CHAPTER VI OF THE BLACK MONEY (UNDISCLOSED FOREIGN
INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015

Introduction

THE BLACK MONEY (UNDISCLOSED FOREIGN
INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015 (referred to here as ‘the
Act’) as passed by the Parliament received the assent of the President on the
26^th of May 2015. The Act contains provisions to deal with the
menace of black money stashed away abroad. It, inter alia, levies tax on
undisclosed assets held abroad by a person who is a resident in India at the
rate of 30 percent of the value of such assets, provides for a penalty equal to
90 percent of the value of such asset, and also provides for rigorous
imprisonment of three to ten years for wilful attempt to evade tax in relation
to a undisclosed foreign income or asset.

2.
Considering the stringent nature of the provisions of the new law, Chapter VI
of the Act, comprising sections 59 to 72, provides for a one-time compliance
opportunity for a limited period to persons who have any foreign assets which
have hitherto not been disclosed for the purposes of Income-tax. This circular
explains the substance of the provisions of the compliance window provided for
in the said Chapter VI of the Act.

Scope of compliance window

3. A
declaration under the aforesaid chapter can be made in respect of undisclosed
foreign assets of a person who is a resident other than not ordinarily resident
in India within the meaning of clause (6) of section 6 of the Income-tax Act.

4. A declaration under the aforesaid
Chapter may be made in respect of any undisclosed asset located outside India
and acquired from income chargeable to tax under the Income-tax Act for any
assessment year prior to the assessment year 2016-17 for which he had, either
failed to furnish a return under section 139 of the Income-tax Act, or
failed to disclose such income in a return furnished before the date of
commencement of the Act, or such income had escaped assessment by reason
of the omission or failure on the part of such person to make a return under
the Income-tax Act or to disclose fully and truly all material facts necessary
for the assessment or otherwise. 

Rate of tax and penalty 

5. The person making a declaration under
the provisions of the chapter would be liable to pay tax at the rate of 30
percent of the value of such undisclosed asset. In addition, he would also be
liable to pay penalty at the rate of 100% of such tax (i.e., a further 30% of
the value of the asset as on the date of commencement of the Act). Therefore,
the declarant would be liable to pay a total of 60 percent of the value of the
undisclosed asset declared by him. This special rate of tax and penalty
specified in the compliance provisions will override any rate or rates
specified under the provisions of the Income-tax Act or the annual Finance
Acts.

Time limits for declaration and making
payment

6. A declaration under the Act can be made
anytime on or after the date of commencement of the Act but before a date to be
notified by the Central Government. As regards the commencement of the Act,
section 1 provides that the Act shall come into force on the 1^st of April, 2016. However, section 3 which specifies the charge
of tax, lays down that tax shall be charged for every assessment year
commencing on or after the 1^st day of April, 2016. Hence, under the Act,
tax is also chargeable for assessment year 2016-17 for which the relevant
previous year is 2015-16. In exercise of its power to remove difficulties under
section 86 of the Act, the Central Government by an order has clarified that
the Act shall come in to force on 1^st July, 2015. Accordingly, the compliance
provisions under Chapter
VI shall also come into force with effect from the date of commencement of the
Act i.e. 1 ^st of July, 2015.

7. The Central Government has further
notified 30^th September, 2015 as the last date for
making the declaration before the designated Principal Commissioner or
Commissioner of Income Tax (PCIT/CIT) and 31^st
December, 2015 as the last date by which the tax and penalty mentioned in para
5 above shall be paid. Accordingly, a declaration under Chapter VI in Form 6 as
prescribed in the Rules may be made at any time before 30.09.2015. After such
declaration has been furnished, the designated Principal CIT/ CIT will issue an
intimation in the proforma annexed to the Circular to the declarant by 31.10.15
whether any information in respect of the declared asset had been received by
the Competent Authority on or before 30^th June 2015, under an agreement entered
into by the Central Government under section 90 or 90A of the Income-tax Act.
Where any such information had been received, the declarant shall file a
revised declaration in Form 6 excluding such asset. The declarant shall not be
liable for any consequences under the Act in respect of, any asset which has
been duly declared but has been found ineligible for declaration as the Central
Government had prior information on such asset. However, such information may
be used under the provisions of the Income-tax Act. The revised declaration
shall be filed within 15 days of receipt of intimation from the designated
Principal Commissioner /Commissioner i.e. if a declarant has received the
intimation on 10^th October 2015, he can file a revised
declaration on or before 25^th October, 2015. However, in all cases, the
declarant is required to pay the requisite tax and penalty on the assets
eligible for declaration latest by 31.12.2015. After the intimation of payment
by the declarant, the Principal CIT/CIT will issue an acknowledgement in Form 7
of the accepted declaration within 15 days of such intimation of payment by the
declarant.

Form for declaration

8. As
per the Act, declaration under the chapter is to be made in such form and shall
be verified in such manner as may be prescribed. The form prescribed for this
purpose is Form 6 which has been duly notified. The table below mentions the
persons who are authorized to sign the said form: 

 The
declaration may be filed with the Commissioner of Income-tax, Delhi. The
declaration may also be filed online on the e-filing website of the Income Tax Department
using the digital signature of the declarant.

Declaration not eligible in certain cases

9. As
per the provisions of section 71 of the Act no declaration under the compliance
window can be made in respect of any undisclosed foreign asset which has been
acquired from income chargeable to tax under the Income-tax Act for assessment
year 2015-16 or any earlier assessment year in the following cases—

(i)        where a notice under section 142 or section 143(2)  or section 148 or section

153A or
section 153C of the Income-tax Act has been issued in respect of such
assessment year and the proceeding is pending before the Assessing Officer. For
the purposes of declaration under section 59 it is clarified that the person
will not be eligible under the compliance window if any notice referred above
has been served upon the person on or before 30^th June 2015 i.e. before the date of commencement of this Act. 

In the form of
declaration (Form 6) the declarant will verify that no such notice has been
received by him on or before 30^th June 2015. 

(ii)             
where a
search has been conducted under section 132 or requisition has been made under
section 132A or a survey has been carried out under section 133A of the
Income-tax Act in a previous year and the time for issuance of a notice under
section 143 (2) or section 153A or section 153C for the relevant
assessment year has not expired. In the form of declaration (Form 6) the
declarant will also verify that these facts do not prevail in his case. 

(iii)           
where
any information has been received by the competent authority under an agreement
entered into by the Central Government under section 90 or section 90A of the
Income-tax Act in respect of such undisclosed asset. For the purposes of
declaration under section 59 it is clarified that the person will not be
eligible under the compliance window if any information referred above has been
received by the competent
authority on or before 30^th June 2015 i.e. before the date of
commencement of this Act.

 A person in respect of whom proceedings
for prosecution of any offence punishable under Chapter IX (offences relating
to public servants) or Chapter XVII (offences against property) of the Indian
Penal Code or under the Unlawful Activities (Prevention) Act or the Prevention
of Corruption Act are pending shall not be eligible to make declaration under Chapter
VI.

 Circumstances where declaration shall be
invalid

 10. In the following situations, a
declaration shall be void and shall be deemed never to have been made:-

(a)   If the declarant fails to pay the entire
amount of tax and penalty within the specified date, i.e., 31.12.2015;

(b)   Where the declaration has been made by
misrepresentation or suppression of facts or information.

Where the
declaration is held to be void for any of the above reasons, it shall be deemed
never to have been made and all the provisions of the Act, including penalties
and prosecutions, shall apply accordingly.

 Any tax or penalty
paid in pursuance of the declaration shall, however, not be refundable under
any circumstances.

 Effect
of valid declaration

11. Where a valid declaration as detailed
above has been made, the following consequences will follow:

(a)   The amount of undisclosed investment in
the asset declared shall not be included in the total income of the declarant
under the Income-tax Act for any assessment year;

(b)   The contents of the declaration shall not
be admissible in evidence against the declarant in any penalty or prosecution
proceedings under the Income-tax Act, the Wealth Tax Act, the Foreign Exchange
Management Act, the Companies Act or the Customs Act;

(c)    The value of asset declared in the
declaration shall not be chargeable to Wealth Tax for any assessment year or
years.

(d)  Declaration of undisclosed foreign asset
will not affect the finality of completed assessments. The declarant will not
be entitled to claim re-assessment of any earlier year or revision of any order
or any benefit or set off or relief in any appeal or proceedings under the Act
or under Income-tax Act in respect of declared undisclosed asset located
outside India or any tax paid thereon.

(Gaurav Kanaujia)
Director to the Government of India

 Copy to:-

1.           
PS to FM/ OSD to FM/ OSD to MoS(R).

2.           
PS to Secretary (Revenue).

3.           
The
Chairperson, Members and all other officers in CBDT of the rank of Under
Secretary and above.

4.           
All Pr.
Chief Commissioners/ Pr. Director General of Income-tax – with a request to
circulate amongst all officers in their regions/ charges.

5.           
Pr.
DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr. DGIT
(L&R).

6.           
Media Co-ordinator and Official
spokesperson of CBDT.

7.           
Web manager for posting on the
departmental website.