The government on encountering the deficit indirect tax revenue collections in comparison to the estimated targets antes up more stringent rules that administer the payment of an additional fee – to shun the income tax violations.
The government kicks in new guidelines of more than 30 pages under direct tax laws, 2019 to restrict the accumulation of unlawful acts and offences in the context of benami transactions and undisclosed foreign income. For this, India has been trying to excavate all the available sources of information from its tax alliance partner countries to snare all the foreign income which is not revealed.
The need to introduce more heavy-handed rules, to surpass the tax evasion, arose when the direct tax revenue collections in FY19 is estimated to be less than the revised ground zero i.e. INR 12 trillion. For the financial year 2020, the target of direct tax collection has been fixed at INR 13.8 trillion in the interim budget in February.
The Central Board of Direct Taxes (CBDT) which is the statutory body for formulating direct tax policy, told that under the latest guidelines, any trespass or violation in terms of concealing the foreign bank account or assets in any way cannot be compounded.
In India, there are two acts – Black Money Act and Imposition of Tax Act which was introduced in the year 2015 to dredge up the Undisclosed Foreign Income and Assets, i.e. the unaccounted money preserved in any foreign country and, to levy tax and penalty on such financial accumulation.
CBDT further added that as per the new guidelines, illegal acts under the Benami Transactions (Prohibition) Act 1988 are also not compoundable. The new guidelines say, “Compounding of offences is not a matter of right,”.
However, the latest guidelines are applicable to the requests for compounding filed after Monday, while the pending ones will be taken care of by the rules prevailing earlier.
India and the US have started sharing information about the financial assets of their respective citizens in the countries. This exchange of information across the country border have made it arduous to disguise wealth in the foreign lands.
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Till now these kinds of tax defaulters used to turn their black money into the white one by paying 30% tax and penalty. But the implementation of new rules will not allow them to use the penalty scheme and strict actions will be taken against them.
