Thursday, July 9, 2015

Declaration of Undisclosed Foreign Income and Assets

The Central Board of Direct Taxes (CBDT) introduced a tax compliance provision related to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 on 6th July, 2015 and notified The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015.

The last date for Compliance provisions for undisclosed foreign income and assets declared by CBDT is   30th September, 2015. 

Before the last date i.e. 30.09.2015, a person may make a declaration in respect of an undisclosed foreign income and asset located outside India.

Last date for payment of Tax and Penalty for the same, if any, declared before 30th September, 2015 is 31st December, 2015.

Points Relating to Declaration of Foreign Assets:-

  • If asset is purchased from Income which is already taxed, then no need of declaration.
  • If asset is purchased from Income which not been charged to tax, then there is a need of declaration.
  • If asset is acquired from corrupt sources, assessee cannot declare his asset under chapter VI. Such declaration shall be void.
  • If a part of foreign assets is acquired from undisclosed income and part from disclosed income, then declaration may be made for the part which is from undisclosed income.
  • If a person being non-resident in India acquired or created a foreign asset out of income which is not chargeable to tax in India, such asset shall not be an undisclosed asset under the Act.
  • If the government bars a person to make declaration about a particular foreign undisclosed asset, he is not eligible to make a declaration. He can only declare other assets.
  • The declarant cannot disclose such foreign assets which have already been assessed by the tax authorities, or the matter is pending before an appellate authority.
  • In case of a survey conducted by the tax authorities on a person, the person cannot make declaration under chapter VI in respect of undisclosed assets acquired in previous year in which survey is conducted. However, he is eligible to make declaration for those assets which are acquired in any other previous year.
  • Where any undisclosed assets are not taxed in the survey or search, then such assets are eligible for declaration.
  • It is not required that the person should hold such undisclosed foreign asset at the time of making declaration.
  • Owner and beneficial owner both are eligible for filing declaration under section59.

Other Important Points: 

  • If a company has a foreign undisclosed asset, it can file declaration, but the directors of the company shall not be liable under the Income-Tax Act, Wealth-Tax Act, FEMA, Companies Act and the Customs Act in respect of declaration made in the name of the company.
  • If a declarant sells such assets in future, then he shall be liable for capital gains. 
  • Since the asset will be taxed at its fair market value, the cost of acquisition for the purpose of Capital Gains shall be the said fair market value and the period of holding shall start from the date of declaration of such asset under Chapter VI of the Act.
  • If notice is served to declarant u/s 142/ 143(2)/ 148/ 153A/ 153C of Income Tax Act and the proceeding is pending before the assessing officer in the year in which such assets are acquired, the assessee can voluntarily declare foreign assets which have been acquired during other years for which no notices under above referred sections have been issued. 
  • If an asset was acquired before the commencement of the Act and no declaration is made under chapter VI, such assets shall be deemed to have been acquired in the year in which they came to the notice of the assessing officer. If any information of an undisclosed foreign asset acquired earlier, say in the year 1975, for $100,000 comes to the notice of an Assessing Officer later, say in the year 2020, when its value becomes, say, $5 Million, the liability under the Act amounting to 120 percent of the fair market value of the asset on the valuation date may arise in the year 2020, besides prosecution and other consequences.
  • If a property is received in inheritance, then legal representative shall file a declaration of undisclosed assets.
  • A person resident in India, if having foreign bank account, and has acquired any assets outside India which is undisclosed, then he must have to declare such asset under chapter VI because it must be taxed in India.
  • After the declaration is made, the Principal Commissioner will enquire whether any information has been received by the competent authority in respect of the asset declared. Apart from this, no other enquiry will be conducted by him at the time of declaration.
  • A Person is not eligible to file declaration if any search and seizure is initiated against him and the time for issuance of notice under section 153A has not expired, or even if notice is not served. Declaration may be made if assets are acquired in any previous year relevant to the assessment under section 153(A).

Contributed by:
Ms. Tanya Gagneja
Sandeep Ahuja & Co.