Government’s likely decision to come up with more FAQs (second set of clarifications) is expected to clear clouds around the new law
By Sai Nikesh D
Government of India and its tax authorities seem to be struggling to clarify various issues related to the anti black money law, even though it has been enforced for more than a year.
On July 6, 2015, the government had come out with a set of clarifications on compliance window, penalties related to the law and is likely to come up with second set of clarifications soon.
An official announcement in this regard was made by the Revenue Secretary Shaktikanta Das on Friday, who informed that his ‘department was likely to issue a second set of clarifications on the new black money Act, after a number of queries by various quarters.’
Experts hope that the new announcements will bring more clarity about the law, especially regarding the provision of compliance window, which allows amnesty in case a person discloses his non-taxed assets. “
It is understood that the government is likely to come out with few more FAQs (frequently asked questions) soon. It is hoped that with these, the clouds around the new law are cleared,” says Nilesh Kapadia, Partner, N M K & Co., Chartered Accountants, Trustee of Foundation for International Taxation.
It is feared that (in absence of such move) the One Time Compliance Scheme (OTCS) will be a big flop and the government may not be able to get much response from the same, he added. Experts are also concerned that the amnesty scheme, which is expiring on September 30, may not bring the desired results within the deadline.
“There is a need for clarity on obtaining valuation reports from jurisdiction where there are no recognised valuers. Besides, it may be difficult to get a report within the short time allowed. Further for shareholder owning minority interest in companies, they may not get access to data required for the valuation,” Kapadia said.
Besides, there is also no assurance that there will be no penal consequences under Foreign Exchange Management Act (FEMA) for continuing offences, he added.
For example, an overseas bank account may be declared under OTCS, but, there should be a clarity on ‘whether that account is required to be closed or the declarant can continue to hold that account and declare income in that account for future returns,’ he said.
This issue needs to be clarified by not just the Central Board of Direct Taxes (CBDT), but also the Reserve Bank of India (RBI) and the Ministry of Finance, which administers FEMA, he added.
On ‘dealing with black money concerns through Participatory Notes (through which overseas investors have chance to invest in the Indian stock markets without registering themselves with SEBI) in the stock market (as raised by the Special Investigation Team of the Supreme Court)’, Kapadia said, “It is heartening to note that the government is not looking at a knee jerk reaction to P Notes. Once the black money law and the multilateral agreement for automatic exchange of information are implemented, the government will be able to identify the parties involved in round tripping and money laundering.”
The Undisclosed Foreign Income and Assets (Imposition of Tax) Act 2015, which came into effect in May last year, is aimed at targeting those hiding money within as well as outside India to evade income tax.
The law imposes liabilities for wrong declaration and has the provision of jail term for offenders ranging from six months to seven years. Those found guilty of hiding money overseas can be sentenced up to 10 years of imprisonment.
This article was published in The Dollar Business on August 22, 2015