29 November 2016
TAX TREATMENT OF BLACK MONEY UNEARTHED ON DEMONETISATION - GOVERNMENT INTRODUCED TAXATION LAW (SECOND AMENDMENT) BILL 2016 IN LOK SABHA
The Government introduced Taxation Laws (Second Amendment) Bill, 2016 in Lok Sabha to address the tax treatment of black money unearthed on demonetisation. The proposal provides an opportunity for taxpayers to declare their undisclosed income either by
(a) paying tax, surcharge and cess @ 77.25% (but without immunity from certain other laws) or
(b) make declaration under a new limited window scheme by paying tax, surcharge and penalty @ almost 50% and block at least 25% of undisclosed income in an interest-free deposit for four years (with immunity from certain other laws).
Taxpayer who does not avail of above opportunity can face stringent penalty ranging from 10% to 60% (in addition to 77.25% tax) apart from other adverse consequences under the Income tax law such as interest, prosecution, etc.
This can be another opportunity for the tax defaulters to declare their unaccounted income. Once the bill is approved, it will be another historic step by the government towards achieving a more transparent and corruption free environment leading to a more progressive economy. The government plans to use this revenue for the welfare of the poor under ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the bill. This program is in line with the Government’s initial manifesto agenda to provide basic infrastructure to all, as this amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc. This should also aid ‘Housing for All by 2022’ program introduced by the Government earlier.