India

Tax laws amended in light of black-money crackdown

02 Dec 2016 | By Supriya
The new Income Tax laws

On November 30, 2016, the Taxation Laws (Second Amendment) Bill 2016 was passed in the Lok Sabha to amend the Income Tax Act 1961.

Amendments were made with respect to treatment of unaccounted money or black money.

The government reiterated that amendments to the IT Act were made essentially because people were trying to launder demonetized currency.

Let's take a look at key-changes.

In context: The new Income Tax laws

02 Dec 2016Tax laws amended in light of black-money crackdown

Brutal crackdownUndisclosed income: Two kinds of treatment

The amendments provide that those who declare black money to banks will be required to pay 50% tax, inclusive of surcharge and penalty.

A quarter of the amount declared will be locked up for four years; remaining 25% will be available for immediate use.

However, those who don't declare and are caught with unexplained cash/deposits will pay 60% tax plus penalties amounting to 85%.

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Mandatory depositsDiverting funds towards the less-privileged

Those who declare undisclosed income pay 30% tax and a surcharge called 'Pradhan Mantri Garib Kalyan (PMGK) Cess' of 33% upon the tax.

25% of this declared income is then locked-in for 4 years in PMGK Deposit Scheme, 2016.

The government proposes to use PMGK cess and deposits in PMGK scheme for education, irrigation, housing, infrastructure and primary health for the poor's welfare.

Unfounded fearsNo change in gold jewellery

The government issued a clarification that tax amendments had no new provision with respect to taxation of inherited gold/jewellery.

Holding jewellery upto 'any extent' was fully protected if acquired with declared wealth.

If during search operations, gold doesn't match individual's income, even then upto 500 grams per married woman, 250 grams per unmarried woman and 100 gms per male member, gold won't be seized.

Lack of clarity on small deposits

Sanjay Sanghvi, tax partner, Khaitan and Co., observed that amendments contained no mention for small deposits of upto Rs.2.5 lakh and said that, "This is likely to create a widespread nervousness and confusion for a lot of people."