Undisclosed foreign income and assets and imposition of tax act

THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME
AND ASSETS) AND IMPOSITION OF TAX ACT, 2015
1st September, 2015
CA. Ameet Patel

AGENDA
 INTRODUCTION
 THE BLACK MONEY SAGA
 STRUCTURE OF THE ACT
 PRELIMINARY
 BASIS OF CHARGE
 PENALTIES
 OFFENCES & PROSECUTIONS
 ONE TIME COMPLIANCE WINDOW
 GENERAL PROVISIONS
 FAQS
2

Introduction
3
India has strongly advocated the fast implementation of the automatic exchange of tax
information globally, within the time-frame agreed by the G20 countries, in the backdrop
of media reporting names of Indian account holders in HSBC bank's Swiss branch.
At the G20 Brisbane summit last November, leaders endorsed a new global
transparency standard by which more than 90 jurisdictions will begin automatic
exchange of tax information, using a common reporting standard by 2017-2018.
"THE WORLD IS NO LONGER WILLING TO TOLERATE TAX HAVENS WHICH
THRIVE IN SECRECY" - ARUN JAITLEY

The Black Money Saga
4
Apr’09
BJP releases a booklet “Indian Black Money Abroad in Secret Banks and Tax Havens”, which contained
allegations against Congress president Sonia Gandhi and her late husband Rajiv Gandhi
Sep’09
India-Swiss prepare to renegotiate the DTAA; to seek details about black money stashed in banks there
Jan’11
Then PM Manmohan Singh questions the calculation behind estimated black money stashed by Indians
abroad ($89.16 billion) but said all possible steps were being taken to bring it back
Aug’11
Appointment of a high-level committee headed by M.C. Joshi (then Chairman of Central Board of Direct
Taxes) to study the generation and curbing of black money

5
Nov’11
Jan’12
Nov’13
Apr’14
India commits to G20 that it will remain an active member of the global battle against black money
India signs Convention on Mutual Administrative Assistance on Tax Matters against black money
Gujarat Chief Minister and BJP's PM candidate Narendra Modi promises to bring back black money stashed
abroad and calls for a law on the subject.
Government discloses to the Supreme Court the names of 26 people who had accounts in banks in
Liechtenstein, as revealed to India by German authorities.

6
May’14
July’14
Oct’14
The Modi government announces the formation of a Special Investigation Team (SIT) on black money,
headed by retired justice M.B. Shah.
Chasing black money, India gets Swiss invite for discussions. Finance Minister Arun Jaitley informs
parliament that there is a positive response to requests made by India to Swiss bank
The Centre discloses that Pradip Burman of Dabur, Rajkot-based bullion trader Pankaj Lodhiya and Goa-based
mining baron Radha Timblo of Timblo Private Ltd. were among those who had stashed black money abroad.
List of around 627 people Indians, holding accounts in foreign banks as revealed by the French government,
submitted to SC

7
Dec’14
Black Money Whistleblower Herve Falciani (who famously leaked information related to thousands of illicit
bank account holders at HSBC in Geneva) contacted by India; Indians in HSBC list hold Rs. 4,479 crores; SIT
wants tax evasion made a ‘criminal offence’
Feb’15
Mar’15
• Bilateral ties with Swiss remain "tense" over its refusal to share bank account details on
the basis of stolen data.
• British banking giant HSBC served summons by the Indian tax authorities regarding
alleged irregularities by its Swiss banking unit.
Black Money Bill tabled in Lok Sabha. The Bill while aiming to bring in a comprehensive new law for
specifically dealing with black money stashed abroad, also provides for a separate taxation of such money

8
Apr’15
May’15
July’15
Switzerland ups vigil as India and some other nations threaten criminal action over suspected black
money in Swiss banks
 Lok Sabha clears Black money Bill. India asks Switzerland for black money information; Switzerland
to make minor changes in its laws.
 Names of Yash Birla & four others (son-in-law of late realty baron Ponty Chadha - Gurjit Singh
Kochar, a Delhi-based businesswoman Ritika Sharma, Mumbai-based individuals behind City
Limousines scam - Sayed Mohamed Masood and Chaud Kauser Mohamed Masood) with Swiss
bank a/c disclosed
Government extends deadline for declaring Black Money to 30th September, 2015

TOTAL universe of the LAW on Black
Money
 The Black Money (Undisclosed Foreign Income and Assets ) and Imposition of Tax
Act, 2015
 Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules,
2015 (Notification dated 2/7/2015)
 Order dated 1st July, 2015 making the Act effective from 1/7/2015 in place of AY
1/4/2016
 Explanatory notes on certain provisions (Circular No. 12 of 2015 dated 2/7/2015)
 FAQs by way of clarification on tax compliance for Undisclosed Foreign Income and
Assets (Circular No. 13 of 2015 dated 6/7/2015)
9

Black Money Act – Some Basics
Regular
Provisions
Flat tax @ 30%
Interest
Penalty @ 300% of tax
Prosecution / confiscation under PMLA
One Time
Compliance
Scheme
Flat tax @ 30%
No Interest
Penalty @ 100% of tax
No prosecution 10

Black Money Act – Some Basics
 It is NOT another VDIS or Amnesty Scheme
 It is a stringent & harsh law
 Intention of the Government is very clear – to unearth black money & punish
offenders
 Last chance has been given to black money hoarders to come clean
 The international movement for automatic exchange of information will greatly support
the success of the Black Money Act
11

12
7 CHAPTERS
88 SECTIONS
I.
Preliminary
(S. 1 – 2)
II.
Basis of
Charge
(S. 3 – 5 )
III.
Tax
Management
(S. 6 – 40 )
IV.
Penalties
(S. 41 – 47 )
V.
Offences &
Prosecution
(S. 48 – 58 )
VI.
Onetime
disclosure
window
(S. 59– 72 )
VII.
General
Provisions
(S. 73 – 88 )

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− Extends to the whole of India
− Effective from 1st July, 2015
− Definitions (15 definitions in Section 2)

14
WHO IS COVERED ?
PERSON
• Not defined under the
Act
• Hence definition under
Income Tax Act needs to
be adopted i.e.
• Individual
• HUF
• Company (impact of
POEM)*
• Firm
• AOP/ BOI
• Local Authority
• Artificial Juridical
person
RESIDENT & ORDINARY RESIDENT
• Within the meaning of clause 6
of Section 6 of the Income Tax
Act (ITA)
• AND by whom tax in respect
of undisclosed foreign income
and assets, or any other sum
of money, is payable under this
Act
• Resident but Not Ordinarily
Resident (RNOR) and
Non-Residents not covered
INCLUDES
• every person who is
deemed to be an
assessee in default
under this Act

 UNDISCLOSED INCOME of an assessee from a source located outside India
 UNDISCLOSED ASSET of an assessee located outside India:
An asset (including financial interest in any entity) located outside India, held by
the assessee in his name or in respect of which he is a beneficial owner, and
he/she has no explanation about the source of investment in such asset or the
explanation given by him is in the opinion of the Assessing Officer unsatisfactory.
The term financial interest in any entity has not been defined in Income Tax Act
as well as the Black Money Act. 15
WHAT IS COVERED ?

16
However , we can refer to the Instructions in the form of Return of Income (ITR Forms):
“Financial interest would include, but would not be limited to, any of the following:-
(1) if the resident assessee is the owner of record or holder of legal title of any financial account, irrespective
of whether he is the beneficiary or not.
(2) if the owner of record or holder of title is one of the following:-
(i) an agent, nominee, attorney or a person acting in some other capacity on behalf of the resident
assessee with respect to the entity.
(ii) a corporation in which the resident owns, directly or indirectly, any share or voting power.
(iii) a partnership in which the resident assessee owns, directly or indirectly, an interest in partnership
profits or an interest in partnership capital.
(iv) a trust of which the resident has beneficial or ownership interest.
(v) any other entity in which the resident owns, directly or indirectly, any voting power or equity interest
or assets or interest in profits.”

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DEFINITIONS
 The following terms have been defined in the same manner under the Black Money
Act as the Income Tax Act:
Black Money Act Income Tax Act
2(1) Appellate Tribunal 2(4)
2(3) Assessment 2(8)
2(4) Assessment Year 2(9)
2(5) Board 2(12)
2(10) Resident 2(42)
 S. 2 (15) All other words and expressions used herein but not defined and defined in the
Income-tax Act shall have the meanings respectively assigned to them in that Act.

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- Charge of Tax
- Scope of Total Undisclosed Foreign Income and Assets
- Computation Mechanism
- Gross Basis
- Pro-rata for partly disclosed income

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TAX
 30% TAX levied in respect of the total undisclosed foreign income and
asset of an assessee for a previous year. An undisclosed asset located
outside India shall be charged to tax on its value in the previous year in
which such asset comes to the notice of the Assessing Officer
 The charge is in respect of EVERY ASSESSEE and for EVERY
ASSESSMENT YEAR commencing on or after the 1st day of April, 2016

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UNDISCLOSED ASSET
“VALUE OF AN UNDISCLOSED ASSET” means the fair market value of an asset (including financial interest in any entity)
determined as per Rule 3 as follows:
1. Bullion, jewellery or precious stone
Higher of:
 cost of acquisition
 price that the bullion, jewellery or precious stone shall
ordinarily fetch if sold in the open market on the valuation
date (i.e. 1-7-2015)
2. Archaeological collections, drawings,
paintings, sculptures or any work of art
(hereinafter referred to as artistic work)
Higher of:
 price that the artistic work shall ordinarily fetch if sold in
the open market on the valuation date (i.e. 1-7-2015)

21
UNDISCLOSED ASSET
3. Shares and Securities
I. Quoted share and securities Higher of:
 the price as determined in the following manner :
A. the average of the lowest and highest price of such shares and
securities quoted on any established securities market on the
valuation date (i.e. 1-7-2015) OR
B. where on the valuation date there is no trading in such shares and
securities on any established securities market, average of the
lowest and highest price of such shares and securities on any
established securities market on a date immediately preceding the
valuation date when such shares and securities were traded on such
securities market

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UNDISCLOSED ASSET
II. Unquoted equity shares Higher of:
 value, on the valuation date, of such equity shares as determined in the following
manner, namely:
FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES = (A+B–L) X (PV)
PE
A = Book value of all the assets (other than bullion, jewellery, precious stone, artistic
work, shares, securities and immovable property)
(-) any amount of income-tax paid, if any, less the amount of income-tax refund
claimed, if any
(-) any amount shown as asset including the unamortized amount of deferred
expenditure which does not represent the value of any asset;

23
B = Fair market value of bullion, jewellery, precious stone, artistic work, shares, securities
and immovable property as determined in the manner provided in this rule;
L = Book value of liabilities, but excluding the following amounts, namely:-
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference & equity shares;
(iii) Any reserves and surplus, by whatever name called, even if the resulting figure is
negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of income-tax paid, if
any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over
the tax payable with reference to the book profits in accordance with the law applicable
thereto;
UNDISCLOSED ASSET

24
UNDISCLOSED ASSET
v) any amount representing provisions made for meeting liabilities, other
than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of
dividends payable in respect of cumulative preference shares;
PE = total amount of paid up equity share capital as shown in the balance-
sheet;
PV = the paid up value of such equity shares;
III. Unquoted share and
security other than equity
share in a company
Higher of:
 Cost of acquisition
 Price that the share or security shall ordinarily fetch if sold in the open
market on the valuation date (i.e. 1-7-2015)

25
4. Immovable property Higher of:
 Cost of acquisition
 Price that the property shall ordinarily fetch if sold in the open market on the
valuation date (i.e. 1-7-2015)
5. Account with a bank I. the sum of all the deposits made in the account with the bank since the date
of opening of the account OR
II. where a declaration of such account has been made under Chapter VI and
the value of the account as computed under sub-clause (I) has been charged
to tax and penalty levied under that Chapter, the sum of all the deposits made
in the account with the bank since the date of such declaration.
However, where any deposit is made from the proceeds of any withdrawal
from the account, such deposit shall not be taken into consideration while
computing the value of the account.
UNDISCLOSED ASSET

6. Value of an interest of a person in a partnership
firm or in an association of persons or a limited
liability partnership of which he is a member
 the net asset of the firm, association of persons or limited
liability partnership on the valuation date shall first be
determined
 ALLOCATION OF NET ASSETS IN FOLLOWING ORDER:
Illustration:
(Situation – 1 – Where dissolution ratio available)
Mr. A (say) Mr. B (say)
NAV – 150; Capital Contribution: A – 25, B – 25;
Dissolution Ratio – 2:1;
Profit Sharing Ratio – 1:1;
25 25(a) Capital Contribution of each partner/
member/person
(b) Dissolution Ratio [Net Assets – Capital of the
Firm (a) ]
67 33
(c) Profit Sharing Ratio [Net Assets – Capital of the
Firm] (Only if in case (b) is not applicable )
- -
Value of interest of that partner or member in the
partnership or association
92 58
UNDISCLOSED ASSET

UNDISCLOSED ASSET
Illustration:
(Situation – 2 – Where dissolution ratio not
available)
Mr. A (say) Mr. B (say)
NAV – 150; Capital Contribution: A – 25, B – 25;
Profit Sharing Ratio – 1:1;
25 25
(a) Capital Contribution of each partner/
member/person
(b) Dissolution Ratio [Net Assets (Less) Capital of
the Firm (a) ]
- -
(c) Profit Sharing Ratio [Net Assets (Less) Capital
of the Firm] (Only if in case (b) is not applicable )
50 50
Value of interest of that partner or member in the
partnership or association
75 75

UNDISCLOSED ASSET
7. Any Other Asset
Higher of:
 price that the asset shall ordinarily fetch if sold in the open
market on the valuation date in an arm’s length transaction

29
UNDISCLOSED ASSET
 Where an asset (other than a bank account) was transferred before the valuation date, FMV of
such asset shall be higher of:
1. Cost of acquisition
2. Sale price (or FMV on date of transfer if transferred without consideration/ inadequate
consideration )
 Where a new asset has been acquired or made out of consideration received on account of
transfer of an old asset or withdrawal from a bank account, then the fair market value of the
old asset or the bank account as the case may be, shall be reduced by the amount of the
consideration invested in the new asset.
Let us understand this with the help of an illustration

30
Illustration
A house property (H1) located outside India was bought in 1997 for 20 lakh rupees. It was sold in
2001 for 25 lakh rupees which were deposited in a foreign bank account (BA). In 2002 another
house property (H2) was bought for 30 lakh rupees. The investment in H2 was made through
withdrawal from BA. H2 has not been transferred before the valuation date and its value on the
valuation date is 50 lakh rupees. Assuming that the value of BA as computed under Rule 3(1)(e) is
70 lakh rupees, the fair market value (FMV) of the assets shall be as below:
FMV of H1: (Higher of Rs. 20 lakh and 25 lakh) – Rs. 25 lakh (invested in BA) = Nil
FMV of BA: Rs. 70 lakh – Rs. 30 lakh (invested in H2) = Rs. 40 lakh
FMV of H2: (Higher of Rs. 30 lakh and 50 lakh) = Rs. 50 lakh
UNDISCLOSED ASSET

31
FMV of an asset is
determined in a currency
which is one of the
permitted currencies
designated by the
Reserve Bank of India
under the Foreign
Exchange Management
Regulations
Then convert into Indian currency as per the
reference rate of the Reserve Bank of India on the
date of valuation.
UNDISCLOSED ASSET

32
FMV of an asset is determined in a
currency other than one of the
permitted currencies designated
by the Reserve Bank of India
 Shall be converted into United States Dollar on the date of
valuation as per the rate specified by the Central Bank of the
country or jurisdiction in which the asset is located and such value
in United States Dollar shall be converted into Indian currency as
per RBI reference rate on the date of valuation
 where the Central Bank of the country or jurisdiction in which the
asset is located does not specify the rate of conversion from its
local currency to United States Dollar then such rate shall be the
one as specified by any other bank regulated under the laws of
that country or jurisdiction.
UNDISCLOSED ASSET

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UNDISCLOSED FOREIGN INCOME AND ASSET
 Income from a source located outside India, which has not been disclosed
in the return of income furnished within time allowed u/s 139(1), 139(4) & 139(5)
of the ITA.
 Income, from a source located outside India, in respect of which a return
is required to be furnished under section 139 of the ITA but no return of
income has been furnished within time allowed u/s 139(1), 139(4) & 139(5) of
the ITA.
 Value of an undisclosed asset located outside India.

34
UNDISCLOSED FOREIGN INCOME AND
ASSET
 Any adjustments/variations made in income from a source outside India which is being assessed
or reassessed under the various charging provisions of the Income Tax Act shall not be included
in the total undisclosed foreign income i.e.
Sections 29 to Sections 43C – Assessment of Business Profits,
Sections 57 to Sections 59 – Assessment of Income from other sources,
Section 92 C - Transfer Pricing Provisions
 Income from House Property and Capital Gains is not included in the above exclusions
 No clarification for adjustment made u/s 93 or 94A or Exchange Rate Differences

35
UNDISCLOSED FOREIGN INCOME AND
ASSET
No deduction allowed in
respect of any expenditure or
allowance
No set off of any loss allowed
If assessee utilises an income to acquire an
undisclosed asset located outside India &
furnishes evidence w.r.t such income that it is
assessable or is assessed to tax in any previous
year prior to 01.04.2015, it shall be reduced
from the value of the asset
“G R O S S B A S I S ”
C O M P U TAT I O N
M E C H A N I S M

36
IMMOVABLE PROPERTY
If an immovable property is being acquired by an assessee partly from assessed income and
undisclosed income then a proportionate deduction to the value of such asset would be allowed by
the Assessing officer i.e.
DEDUCTION = Assessable/ assessed Foreign Income X Value of the asset as on the 1st day
Total Cost of the Asset of the FY in which it comes to
the notice of the AO
Illustration:
A house property located outside India was acquired by an assessee in the previous year 2009-10
for Rs 50 L Out of the investment of Rs. 50 L, Rs. 20 L was assessed to tax in the total income of
the previous year 2009-10 and earlier years. Such undisclosed asset comes to the notice of the
Assessing Officer in the year 2017-18. If the value of the asset in the year 2017-18 is Rs. 1 Cr., the
amount chargeable to tax shall be A-B=C
where, A=Rs.1 crore, B=Rs. (100 x 20/50) lakh= Rs.40 lakh, C=Rs. (100-40) lakh=Rs.60 lakh.

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− Administrative Machinery
− All powers are on the same lines as under the IT Act for
Assessment & Reassessment, Rectification, Appeals,
Revision of Orders, Recovery, Interest

 The same List of Income Tax Authorities as mentioned under Section 116 of the
Income Tax Act, 1961 would be managing assessments under the proposed Act -
 No requirement to file a separate return under Black Money Act.
 The AO may, on receipt of an information from an Income-Tax Authority under the
Income-tax Act or any other authority under any law for the time being in
force or on coming of any information to his notice, serve on any person, a
notice requiring him on a date to be specified to produce or cause to be produced
such accounts or documents or evidence as he may require.
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PROCEDURES

 No Time Limit for issuing notices for assessment / reassessment unlike
under the ITA. As soon as AO receives information, a notice can be issued.
 Time Limit of completion of assessment or reassessment under the Act is set
as two years from the end of the financial year in which notice is served.
 2 Assessment Orders expected to be passed under section 143(3) of ITA and
10(3) of Black Money Act
 Any sum payable in consequence of any order made under this Act shall be
demanded by a tax authority by serving upon the assessee a notice of demand
in FORM 1 39
PROCEDURES

40
TAX AREARS
In order to recover the tax due from an assessee, the Assessing Officer or the Tax
Recovery Officer, may by a notice in writing require:
• The employer of the assessee to deduct from any payment to the assessee such amount as is
sufficient to meet the tax arrear from the assessee
Employer
• Any debtor of the assessee to pay such amount, not exceeding the amount of debt, as is
sufficient to meet the tax arrear of the assessee.
• If debtor fails to make payment, he shall be deemed to be assessee in default and
proceedings may be initiated against him for realization of amount.
• If the debtor discharges any liability to the assessee after receipt of a notice, he shall be
personally liable to the AO or TRO to the extent of his own liability to the assessee so
discharged or to the extent of the liability of the assessee for any sum due under this Act,
whichever is less.
Debtor

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PERSONS OTHER THAN ASSESSEE
ASSESSEE
PERSONS JOINTLY & SEVERALLY LIABLE
(where amount is not recoverable from the assessee)
Company Manager (including a managing director) of a company
Firm / LLP
Partners of the firm / representative assessee of the
deceased partners
AOP / BOI
Member of AOP/ BOI /representative assessee of the
deceased members
HOWEVER, A PARTNER OF AN LLP AND MANAGER OF A COMPANY SHALL NOT BE
LIABLE if the manager/partner prove that non-recovery cannot be attributed to any neglect,
misfeasance or breach of duty on his part in relation to the affairs of the company./partnership
The Act is silent on the liability of partners of the firm other than LLP and members of AOP and
BOI.

42
− Undisclosed Foreign Income & assets
− Failure to furnish return in relation to foreign income and asset
− Default in payment of Tax Arrears
− Failure to furnish an information or furnish inaccurate particulars about
an asset (including financial interest in any entity) located outside India
− Other defaults

43
PARTICULARS FIXED PENALTY
Failure to disclose foreign Income / Asset (S.41) 300% of the Tax
Payable
Failure to furnish return of income w.r.t. foreign asset or
income (S.42) * Rs. 10 Lakh
Failure to furnish information/ inaccurate particulars about an
asset (including financial interest in any entity) located outside
India in ROI (S. 43)*
Rs. 10 Lakh
PENALTIES
* Such penalty shall be levied whether the asset is held by him as a beneficial owner or
otherwise, or in respect of which he was a beneficiary, or relating to any income from a source
located outside India, at any time during such previous year. However, failure to disclose one or
more foreign bank accounts having an aggregate balance not exceeding Rs 500,000/- at
any time during the previous year shall not attract any penalty even if not reported.

44
PARTICULARS PENALTY
Failure to pay Tax in Arrears (S. 44) Amount of
Tax arrear
If assessee fails to:
(1) answer any question or
(2) sign a statement he is legally bound to or
(3) produce books and supporting evidences (S. 45)
Min. Rs.
50,000 to
Max. Rs.
2,00,000
PENALTIES

45
− Willful attempt to evade tax, penalty or interest
− Failure to furnish return in relation to foreign income and asset
− Failure to furnish an information or furnish inaccurate particulars
about an asset (including financial interest in any entity) located
outside India
− Other punishments

46
OFFENCE
PROSECUTION
Rigorous
Imprisonment
Failure to furnish return of income w.r.t foreign asset or
income (S. 49) *
Min. 6 months to 7
years plus Fine
Failure to furnish information/ inaccurate particulars
about an asset (including financial interest in any entity)
located outside India in ROI (S . 50) *
Min. 6 months to 7
years plus Fine
PROSECUTIONS
* Such rigorous imprisonment shall apply whether the asset is held by him as a
beneficial owner or otherwise, or in respect of which he was a beneficiary, or
relating to any income from a source located outside India, at any time during such
previous year

47
OFFENCE
PROSECUTION
Rigorous Imprisonment
Wilful Attempt to evade tax (S.51)
1. Resident and Ordinarily Resident
2. Others
Min 3 years to Max 10
years and Fine
Min 3 months to Max 3
years and Fine
Subsequent offences under this Act- where a person
commits the second (or subsequent) offence
Min 3 years to Max 10
years And Fine Rs.5 lac to
Rs.1 cr
Person makes false statement or delivers false
evidences (S.52)
years
Abetment to make and deliver false return, account,
statement or declaration relating to tax payable (S. 53)
years
PROSECUTIONS

48
PROSECUTIONS
 In any prosecution for any offence under this Act which requires a culpable mental state,
on the part of the accused, the court shall presume the existence of such mental state
but it shall be a defense for the accused to prove the fact that he had no such mental
state with respect to the act charged as an offence in that prosecution (ONUS TO
PROVE NON EXISTENCE OF CULPABLE MENTAL STATE SHIFTED TO ACCUSED)
Explanation.—“culpable mental state” includes intention, motive or knowledge of a
fact or belief in, or reason to believe, a fact.
 A fact is said to be proved only when the court believes it to exist beyond reasonable
doubt and not merely when its existence is established by a preponderance of
probability.

49
BODY CORPORATE/ AOP/ BOI/FIRM/ HUF
 Where an offence under this Act has been committed by a Body corporate/ Firm/ LLP/ AOP/ BOI/HUF,
(herein referred as “Company”) the following persons shall be prosecuted:
1. person in charge of and responsible to the company for the conduct of the business at the time the
offence was committed unless he proves that the offence was committed without his knowledge or
that he had exercised all due diligence to prevent the commission of such offence
2. director, manager, secretary or other officer of the company if it is proved that the offence has been
committed with the consent or connivance of, or is attributable to any neglect on the part of them.

50
− Charge of Tax & penalty, Time limit for Declaration & Payment
− Persons not eligible for declaration
− Declaration not eligible in certain cases
− Declaration invalid in certain cases
− Effects of a Valid Declaration

51
 One Time Compliance Opportunity by the Act not to be equated with VDIS of 1997
 Declaration to 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 beginning on 1st day of April, 2016. HENCE THE DECLARATION WINDOW IS
ONLY IN RESPECT OF UNDISCLOSED ASSETS AND NOT UNDISCLOSED INCOME.
 Declaration has to be made along with payment of 30% tax on value of such undisclosed asset and
another 30% as penalty. 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.

52
 Such Declaration would not be included in any Income Tax Assessment and would also not affect any
previous completed assessments
 Assets declared would be exempted from Wealth Tax
 Declaration will not be used for imposing penalty or prosecution under Income-tax Act 1961, Wealth Tax Act
1957, Foreign Exchange Management Act 1999, Companies Act, 2013 or Customs Act, 1962
 Tax and Penalty so paid shall not be refundable
 Any Declaration made by misrepresentation or suppression of fact shall be deemed as void.
Statement of Objects and Reason to the Act clarified that only till the time Chapter VI - One
Time Compliance Window is in existence, no evidence against the declarant shall be used for
initiating penalty or prosecution under ITA, Wealth Tax Act, FEMA, Companies Act or Customs
Act.
“It is merely an opportunity for persons to become tax compliant before the stringent
provisions of the new legislation come into force” - (Statement of Objects and Reasons)

53
 Such declaration shall be made in FORM 6
Sl. Declarant Declaration to be signed by
1 Individual
Individual; where individual is absent from India, person authorized by him; where the
individual is mentally incapacitated, his guardian or other person competent to act on his
behalf.
2 HUF
Karta; where the Karta is absent from India or is mentally incapacitated from attending to his
affairs, by any other adult member of the HUF
3 Company
Managing Director; where for any unavoidable reason the managing director is not able to
sign or there is no managing director, by any director.
4 Firm
Managing partner; where for any unavoidable reason the managing partner is not able to sign
the declaration, or where there is no managing partner, by any partner, not being a minor.
5
Any Other
Association
Any member of the association or the principal officer.
6 Any Other Person That person or by some other person competent to act on his behalf.

 Undisclosed foreign income (what is covered is only undisclosed foreign asset)
 Assets acquired from any foreign source income which is not disclosed but not taxable in India.
Eg. Assets acquired by a person while he was a Non resident and now he has become Resident and
Ordinarily Resident.
 Any adjustments/variations made in income from a source outside India which is being assessed or
reassessed under the various charging provisions of the Income Tax Act shall not be included in the total
undisclosed foreign income i.e.
 Sections 29 to Sections 43C – Assessment of Business Profits,
 Sections 57 to Sections 59 – Assessment of Income from other sources,
 Section 92 C - Transfer Pricing Provisions
54
EXCLUSIONS FROM
DECLARATION UNDER CHAPTER VI

55
TIME LIMIT
 The Central Government by an order has clarified that the Act shall come in to force
on 1st 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. 1st of July,
2015.
 The Central Government has further notified 30th September, 2015 as the last date for
making the declaration before the designated Principal Commissioner or Commissioner
of Income Tax (PCIT/CIT) and 31st December, 2015 as the last date by which the tax
and penalty mentioned in para 5 above shall be paid

 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 30th 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
56

57
DECLARATION PROCEDURE
SUMMARY
Declaration filed by the
Assessee up to 30.09.2015
Check whether
Information already with
Central Government (CG)?
Principal CIT/ CIT will
intimate Assessee within
15 days to change the
declaration
Revised Declaration filed
by assessee ?
Time Given upto
31.12.2015 to pay Taxes
and Penalty
Information may
be used under
Income Tax Act
YES
NO
NO
Part Information
already with CG
YES

 Any person in respect of whom an order of detention has been made under the Conservation
of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (subject to certain
conditions)
 Any person who is subjected to prosecution for any offence punishable under Chapter IX or
Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act,
1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988
 Any person notified under section 3 of the Special Court (Trial of Offences Relating to
Transactions in Securities) Act, 1992
 Any person against whom notice of assessment has been issued under Income Tax Act 1961
 Any person against whom time limit for furnishing of notice of assessment has not expired due to
search, survey under the Income Tax Act 1961
 ‘Any information’ received by Competent Authority under DTAA or TIEA in respect of the
undisclosed asset, etc. 58
INELIGIBILITY

 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 30th 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 30th June 2015.
 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.
59
INELIGIBILITY

60
 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 30th June 2015 i.e. before the date of
commencement of this Act.
INELIGIBILITY

61
DECLARATION
INVALID
 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.

62
VALID
DECLARATION
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;

63
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
VALID DECLARATION

64
− Agreement with foreign countries
− Communication under this Act

65
 Section 73 of the Act states that the Central Government may enter into an agreement
with the Government of any other country or specified territory:
 to avoid double taxation;
 for exchange of information for prevention of evasion or avoidance of tax on
undisclosed foreign income for investigation of cases of evasion or avoidance of tax
on undisclosed foreign income;
 for recovery of tax; or
 for carrying out any other purpose of the proposed legislation.
AGREEMENT WITH FOREIGN COUNTRIES

 Therefore, possibly in future we will see such new agreements which will be entered
into by the Central Government under this Act for granting of relief of tax paid under
this Act or taxes paid abroad.
 Hence, relief under the existing DTAA can not be claimed and till such time as
agreements under section 73 are not entered into, credit for taxes paid abroad will
not be available under this Act and vice versa.
 However, section 84 of the Act provides that provisions of clause (c) and (d) section
90(1) and 90A(1) of the ITA with respect to exchange of information for evasion or
avoidance of Tax and recovery of tax shall be applicable to this Act.
66
AGREEMENT WITH FOREIGN COUNTRIES

 Notice, summons, requisition, order or any other communication under this Act may be made by delivering
or transmitting a copy thereof, to the person named therein:-
 Post
 Courier service
 Fax
 Email
 Where any tax, interest or penalty is payable in consequence of any order passed under the provisions of
the Act, the Assessing Officer shall serve upon the assessee a notice of demand in Form 1 specifying the
sum so payable
 A notice would be deemed to have been duly served if the person has appeared in any proceeding or
co-operated in any inquiry relating to an assessment, except in case where such person has raised
objection before the completion of assessment. 67
COMMUNICATION UNDER THE ACT

 Any assessee who is entitled or required to attend before any tax authority or the Appellate Tribunal, in
connection with any proceeding under this Act, may attend through an authorised representative.
“Authorised representative” means a person authorised by the assessee in writing to appear on his behalf,
being—
(a) a person related to the assessee in any manner, or a person regularly employed by the assessee;
(b) any officer of a scheduled bank with which the assessee maintains a current account or has other regular
dealings;
(c) any legal practitioner who is entitled to practice in any civil court in India;
(d) an accountant;
(e) any person who has passed any accountancy examination recognised in this behalf by the Board; or
(f) any person who has acquired such educational qualifications as may be prescribed. 68
AUTHORISED REPRESENTATIVE UNDER THE ACT

69
AUTHORISED REPRESENTATIVE UNDER THE
ACT
The following persons shall not be qualified to represent an assessee namely:—
(a)a person who has been dismissed or removed from Government service;
(b) a legal practitioner, or an accountant, who is found guilty of misconduct in his
professional capacity by any authority entitled to institute disciplinary proceedings
against him;
(c) a person, not being a legal practitioner or an accountant, who is found guilty of
misconduct in any tax proceedings by such authority as may be prescribed

FAQ 1
Can the partner file declaration in
respect of such asset?
Foreign Assets
Indian Firm
No

FAQs 2, 3 & 4
Foreign Assets
Can the Company file a declaration
under Chapter VI of the Act?
Indian
Company
Yes
Would the directors have immunity?
Directors of the company shall not be liable for any
offence 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.
What about immunity under other
Acts?
Not Available

FAQ 5
Where an undisclosed foreign asset is declared under Chapter VI of the
Act and tax and penalty is paid on its FMV then will the declarant be liable
for capital gains on sale of such asset in the future? If yes, then how will
the capital gains in such case be computed?
Yes, the declarant will be liable
Capital
Gain
Sale
Consideration
COA
OCA = FMV
since the asset
is taxed at
FMV
Period of holding shall start from the date of declaration of
such asset under Chapter VI of the Act

FAQ 6 & 7
Assessee142
143(2)
148
153A
153C
Notices
Is Assessee eligible for voluntary declaration u/s
59 of the Act?
Assessee will only be ineligible from declaration of those foreign assets which
have been acquired during the year for which a notice under section 142/
143(2)/ 148/ 153A/ 153C is issued and the proceeding is pending before the
Assessing Officer.
What if the notice was issued but not served on
the declarant?
The declarant will not be eligible for declaration where notice has been issued on or
before 30th day of June, 2015. The declarant is required to file a declaration regarding
receipt of any such notice in Form 6.

FAQ 8
Years not pending for Assessment Year pending for Assessment
Foreign Asset acquired in 2 different years
Notice served on or before 30-06-2015 - the undisclosed asset can be declared under Chapter VI of the Act.
While computing the amount of declaration the investment made in the asset during the previous year
relevant to the assessment year for which such notice is issued needs to be deducted from the FMV of the
asset. For this, the person shall provide a computation along with the declaration. Further, such investment
which is deducted from the fair market value shall be assessable in the assessment of the relevant assessment
year pending under the Income-tax Act and the person shall inform the Assessing Officer the investment made
during the relevant year in such asset.

FAQ 9
Can a declaration be made of undisclosed foreign assets which have
been assessed to tax and the case is pending before an Appellate
Authority?
• Section 65 - Declarant not entitled to re-open any assessment or
reassessment made under the Act. Therefore, he is not entitled to
avail the tax compliance in respect of those assets.
• However, he can voluntarily declare other undisclosed foreign assets
which have been acquired or made from income not disclosed and
consequently not assessed under the Income-tax Act.

FAQ 10
Can a person against whom a search/ survey operation has been
initiated file voluntary declaration under Chapter VI of the Act?
Not eligible if a search has been initiated and the time for issuance of
notice u/s 153A has not expired, even if such notice for the relevant A.Y
has not been issued.
Can file a declaration in respect of an undisclosed foreign asset acquired
in any P.Y in relation to an A.Y which is prior to A.Y relevant for the
purpose of notice under section 153A.
In case of survey operation the person is barred from making a declaration under
Chapter VI in respect of an undisclosed asset acquired in the P.Y in which the
survey was conducted. The person is, however, eligible to make a declaration in
respect of an undisclosed asset acquired in any other P.Y

FAQ 11 & 12
Where a search/ survey operation was conducted and the assessment has been completed but the
undisclosed foreign asset was not taxed, then whether such asset can be declared under Chapter VI
of the Act?
• Yes, such undisclosed asset can be declared under Chapter VI of the Act.
Whether a person is barred from voluntary declaration under Chapter VI of the Act if any information
has been received by the Government under DTAA?
• Sec 71(d)(iii) – A person cannot make a declaration of an undisclosed
foreign asset where the CG has received an information in respect of
such asset under the DTAA. The person is entitled for voluntary
declaration in respect of other undisclosed foreign assets for which
no information has been received.

FAQ 13
What if the Govt. already
received information of an
undisclosed foreign asset?
Is the declaration ineligible?
Declaration to be filed
by 30-09-2015
Intimation by
PC/Comm. by
31-10-2015 regarding
eligibility

FAQ 14
What are the consequences if no declaration under
Chapter VI of the Act is made in respect of
undisclosed foreign assets acquired prior to the
commencement of the Act?
• Such asset shall be deemed to have been acquired
in the year in which it comes to the notice of the
Assessing Officer and the provisions of the Act
shall apply accordingly.

FAQ 15 & 16
If a declaration of undisclosed foreign asset is made under Chapter VI of
the Act and the same was found ineligible due to the reason that
Government had prior information under DTAA then will the person be
liable for consequences under the Act?
• No action lies in respect of such assets under the Act. However, such
information may be used for the purpose of the Income-tax Act.
Where the proceedings under the Income-tax Act are initiated, can the
options of settlement commission etc. under the Income-tax Act be availed
in respect of such assets?
• All the provisions of the Income-tax Act shall be applicable in respect of
those assets.

FAQ 17
A person has some undisclosed foreign assets. If he declares
those assets in the Income-tax Return for A.Y. 2015-16 or say A.Y.
2014-15 (in belated return) then should he need to declare those
assets in the voluntary tax compliance under Chapter VI of the
Act?
The foreign asset is liable to be taxed under
the Act (whether reported in the return or not) if
the source of investment in such asset is
unexplained. Declaration should be made
under Chapter VI

FAQ 18
A person holds certain foreign assets which are fully explained and acquired out
of tax paid income. However, he has not reported these assets in Schedule FA of
the Income-tax Return in the past. Should he declare such assets under Chapter VI
of the Act?
If assets are fully explained – not treated as
undisclosed, then they are not to be declared
under Chapter VI of this Act
If not reported in Sch - FA of ITR – Penalty of Rs
10 L u/s 43
No Penalty if asset is 1 or more foreign bank a/c
with aggregate balance not exceeding 5L at any
time during the P.Y

FAQ 19
A person has been depositing and spending money
over the years. Now the balance is $500. Does he need
to pay tax on this $500 under the declaration?
Sec 59 –
Declaration of
undisclosed
asset, NOT
income
Tax on FMV
For bank A/c,
FMV = Sum of
all deposits in
the A/c as per
Rule 3(1)(e)
Tax & penalty
on such FMV
and not on the
balance as on
date

FAQ 20
Assessee
1994-95 to 1997-98
Undisclosed
Is declaration required under
Chapter VI?
The consequences of non-declaration may arise under the
Act at any time in the future when the information of such
account comes to the notice of the AO

FAQ 21
House property inherited from unexplained sources by Son from his
late father in 2003-04 and sold in 2011-12. Is declaration required?
What is the FMV?
Declaration required under Chapter VI by the son in the capacity
of legal representative of his father. The FMV of the property in
his case shall be higher of its cost of acquisition and the sale price
as per Rule 3(2) of the Rules.

FAQ 22
A person acquired a house property in a foreign country during 2000-01, from
unexplained sources of income and sold it in 2007-08 proceeds were deposited
in a foreign bank A/c. Does he need to declare both the assets under Chapter VI
and pay tax on both
Declaration required on both at FMV.
FMV
of HP
Higher of
Cost or SP
Amount
deposited in
bank a/c

FAQ 23
A person is a non-resident. However, he was a resident of India earlier and
had acquired foreign assets out of income chargeable to tax in India which
was not declared in the return of income or no return was filed in respect of
that income. Can that person file a declaration under Chapter VI of the Act?
Since the person was a resident in the year in which he had acquired
foreign assets (which were undisclosed) out of income chargeable to tax
in India, he is eligible to file a declaration under section 59 in respect of
those assets under Chapter VI of the Act.

FAQ 24 & 25
Resident assessee who was non-resident when assets were
acquired out of income which was not chargeable to tax in India.
Is declaration required?
No. Those assets do not fall under the definition of undisclosed
assets under the Act.
Assessee has 3 foreign assets and declares only 2. Will he get
immunity from the Act in respect of the 2 assets declared?
Immunity will be available for the 2 assets but not for the 3rd asset
which was not declared

FAQ 26
A resident earned income outside India, deposited in his foreign bank a/c
and was charged to tax in the foreign country when it was earned but the
same was not declared in the return of income in India and consequently
not taxed in India. Does he need to disclose such income under Chapter
VI?
The foreign bank account needs to be declared and no
credit of foreign taxes allowable in India as section 84 does
not provide for application of sections 90(1)(a)/90(1)(b)/
90A(1)(a)/ 90A(1)(b) of the Income-tax Act. Further, section
73 of the Act does not allow agreement with foreign
country for the purpose of granting relief in respect of tax
chargeable under the Act.

FAQ 27
Can a person declare under Chapter VI his undisclosed foreign assets which have
been acquired from money earned through corruption?
No. As per section 71(b) of the Act, Chapter VI shall not apply, inter-
alia, in relation to prosecution of any offence punishable under the
Prevention of Corruption Act, 1988.

FAQ 28
Foreign
Asset
Undisclosed
income
Tax Paid
Income
Only part of the investment is such foreign asset is undisclosed
(unexplained) hence declaration of such foreign asset may be
made under Chapter VI of the Act. Section 5 of the Act will apply
& value of undisclosed asset will be reduced by the amount of
income that has been assessed to tax in the past

FAQ 29 & 30
Should the undisclosed foreign
asset be held by the declarant on
the date of declaration?
The declaration may be made
even if the same has been
disposed off and is not held by
the declarant on the date of
declaration.
Will the Principal Commissioner/
Commissioner do any enquiry in
respect of the declaration made?
After declaration, the PC/ Comm
will enquire whether any
information has been received by
the competent authority in
respect of the asset declared.

FAQ 31 & 32
A person is a beneficiary in a
foreign asset. Is he eligible for
declaration under section 59 of
the Act?
Yes
A person was employed in a
foreign country where he
acquired or made an asset out
of income earned in that
country should it be declared?
No if the income was not
chargeable to tax in India

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