Indians having undisclosed property abroad will have to pay tax and penalty on the basis of the current market value of the asset, and not at the purchase price, as per the new black money bill.
However, the tax and penalty would take into account the part-disclosure, if any, made by the taxpayer with regard to the purchase of the concerned property.
Giving an illustration on how the tax would be charged, ’The Undisclosed Foreign Income and Assets (Imposition of Tax) bill 2015’ says that the tax liability on an overseas property would be computed on the basis of its current market price, and not the price at which it was acquired.
The illustration provided in the Bill, which seeks to deal effectively with the black money stashed abroad, talks about an overseas property supposedly purchased by an Indian in 2009-10 for Rs. 50 lakh, whose current market value rises to Rs. 1 crore in 2017-18.
“A house property located outside India was acquired by an assessee in the previous year 2009-10 for Rs. 50 lakh. Out of the investment of Rs. 50 lakh, Rs. 20 lakh was assessed to tax in the total income of the previous year 2009-10 and earlier years.
“Such undisclosed asset comes to the notice of the Assessing Officer in the year 2017-18. If the value of the asset in the year 2017-18 is Rs. 1 crore, the amount chargeable to tax shall be ... Rs. 60 lakh,” said the illustration appended to the Chapter on Basis of Charging Tax.
The calculation takes into account that tax assessment was made on an amount of Rs. 20 lakh after purchase of the property, meaning a non-disclosure of assets worth about Rs. 30 lakh at that time. Since the total value of the property has doubled to Rs. 1 crore, in the same ratio the quantum of undisclosed asset also doubles from Rs. 30 lakh to Rs. 60 lakh.
The undisclosed assets according to the Bill would include the overseas property in the name of the assessee and those in which he is the beneficial owner.
It would also include those property about which the assessee failed to give explanation about the source of investment to the tax officials.
The Bill, tabled in the Lok Sabha on Friday, also provides for rigorous imprisonment of six months to seven years with fine for abetment of offences relating to concealment of overseas income on assets. This clause could cover chartered accountants and consultants.
However, such offenders would have a limited window to file a declaration before a tax authority, followed by payment of tax at 30 per cent and an equal amount of penalty.
The Bill provides for a separate taxation of undisclosed income abroad which will be no longer taxed under the Income Tax Act.
The bill says that concealment of income in relation to a foreign asset will attract penalty equal to three times the amount of tax (90 per cent of the undisclosed income or the value of the undisclosed asset). This would be over and above tax at a flat rate of 30 per cent.
It also provides for a rigorous imprisonment of up to 10 years for concealment of overseas income.
