The Lok Sabha on Tuesday passed amendments to the Income Tax Act that the government had proposed to bring in stricter rules and penalties for those with undisclosed income. According to the Taxation Laws (Second Amendment) Bill, 2016, people with undisclosed income can come clean by paying 30% tax on the amount along with 10% penalty and 33% surcharge. Finance Minister Arun Jaitley had tabled the Bill in the lower house on Monday.
Such declarants will also have to deposit 25% of the undeclared amount in an interest-free deposit scheme for four years. The government has not yet announced the deposit scheme that will be used to keep a portion of such sums under a lock-in period. The money will be used for government programmes for irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc.
The Centre has also proposed a 75% tax and 10% penalty in case the money is not voluntarily disclosed after demonetisation, but detected by Income Tax officials. The government has kept in tact the current provision of 50% penalty on under-reporting of income (returned income), and 200% for misreporting (assessed income).
As of now, undisclosed income is taxed at a flat rate of 30%, besides surcharge and cess. The government intends to amend Section 115BBE of the I-T Act to introduce punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.
Prime Minister Narendra Modi had announced his government’s decision to demonetise Rs 500 and Rs 1,000 notes on November 8, in what he said was a step to fight black money, corruption and circulation of counterfeit currency in the country.