In what virtually amounts to another voluntary income disclosure scheme, the Centre on Monday introduced a Bill in the Lok Sabha that gives tax defaulters an opportunity to come clean by paying tax and penalties.
The key feature of the proposed amendment to the Income-Tax Act is a proposal to impose 50 per cent tax on undeclared income that is voluntarily disclosed till December 30, following which 82.5 per cent (75 per cent tax and 10 per cent of such tax as penalty) could be levied on undeclared income detected by authorities. The tax changes are intended to supplement the demonetisation move targeted at curbing black money, the Finance Ministry said in a statement.
The proceeds — made a part of the Pradhan Mantri Garib Kalyan Yojana — will be used to fund schemes for providing “irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood, so that there is justice and equality,” the Ministry said.
“In the wake of declaring specified bank notes ‘as not legal tender’, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean,” the government said, explaining the rationale for the proposed tax law change. This would not only help the government get additional revenue for undertaking activities for the welfare of the poor but would also ensure “the remaining part of the declared income legitimately comes into the formal economy.”
Revenue Secretary Hasmukh Adhia said no questions would be asked about source of funds for disclosures under the scheme. “It would ensure immunity from wealth tax, civil laws and other taxation laws,” he said.
