The Undisclosed Foreign Income & Assets (Imposition of Tax) Bill, 2015 has been passed in both the houses and the bill now awaits the President’s assent to become a law.
Here are the highlights of this bill –
- The bill proposes that starting financial year 2015-16 undisclosed foreign income & assets will be taxed under this new bill. Such income & assets will no longer be covered under the existing Income Tax Act, 1961.
- The new bill only applies to the Residents of India (including their legal heirs).
- A flat tax rate of 30% shall be charged on undisclosed foreign income and asset. A penalty of 90% of the undisclosed income will also be charged.
- No exemptions, deductions or set off of any carried forward losses (as provided under the IT Act) would apply to such income & assets.
- A penalty of Rs 10lakhs may be charged for failure to include details of foreign assets or income or in the income tax return or if inaccurate details have been furnished.
- Evasion of these taxes may also result in imprisonment from 3 years to 10 years. Cases where return has been filed but the tax payer failed to disclose foreign assets will also be punishable with imprisonment of 6 months to 7 years.
- Since this bill is applicable to Residents – there is no exemption for expatriates who may become residents by virtue of their extended stay – so they much watch out for compliance with this bill.
- The bill after receiving President’s assent will offer a window of one time compliance – where tax payers can disclose such foreign income & assets. During this window, a 30% tax (mentioned above) and a 30% penalty shall be charged instead of the 90% penalty. This window will be announced shortly.