Finance Minister Arun Jaitley on Monday introduced a bill in the Lok Sabha to amend the Income Tax rules levying a tax of 60 per cent on undisclosed income or investment or cash credit deposited in the banks.
According to the Taxation Laws (Second Amendment) Bill, 2016, the declarant will additionally have to pay regular tax on the amount left after deducting the 60 per cent levy.
The government has also come up with an income disclosure scheme called the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016, which allows people to deposit money in their accounts till April 1, 2017, by paying 50 per cent of the total amount -- 30 per cent as tax, 10 per cent as penalty and 33 per cent of the taxed amount-- that is 10 per cent -- as Garib Kalyan Cess.
Additionally, under this scheme, 25 per cent of the amount has to be locked up for four years in interest-free Pradhan Mantri Garib Kalyan Deposit Scheme.
The total amount so declared under this new income declaration scheme (PMGKY) will not be included in the total income of the declarant for any assessment year. No set off is allowed under any head on this amount.
In case of undeclared income found during income tax searches, a penalty of 30 per cent shall be imposed by the Income Tax Department apart from the regular tax on the money. This would be done if the assessee admits to the undisclosed income and "substantiates" the manner in which the undisclosed income was derived.
However, if the assessee does not do that, the penalty would be raised to 60 per cent, in addition to the tax required to be paid.
In the objects and reasons statement the finance minister said the amendment had been brought forward as "there have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean."
He said this would allow the government to get additional revenue for undertaking activities for the welfare of the poor, but also the remaining part of the declared income would legitimately comes into the formal economy.