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Prepare to pay tax on Undisclosed Foreign Income and Assets


Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015

Where is Black money stashed abroad? When will it hit Indian shores? Will it ever come to India? Is it just hype, a myth? These are the questions lingering in the minds of millions of Indians. No one is willing to buy any theory. ‘We have appointed SIT’ (So what? Where is the money?) ‘We have signed agreements with foreign countries’ (oh Great, But where is the money?) “We have spoken about it in G20 countries (That’s fine, but where is the money?)

This Government is trying to bring black money supposedly parked outside the country. By now, the actions show that they have realized that the black money, if at all is there abroad, can’t be traced! Looks like their treasure hunt has failed! It is common sense, isn’t it? If they have identified the locations or people who have kept money abroad, they can catch them red handed. Now that they are not in a position to catch them, they are warning the thieves to disclose the assets and pay taxes. They are black mailing the offenders by bringing out a new Law called ‘Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015


What is this Bill all about?

This Bill provides for taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the proposed new legislation.


What are its features?

This Act will come into effect on the 1st day of April 2016. This Act will apply to all persons resident in India. (If it is passed in the Parliament; will our opposition allow it to be passed? We have to wait and see!)


30% Tax: Undisclosed foreign income or assets shall be taxed at the flat rate of 30 percent. No exemption or deduction or set off of any carried forward losses which may be admissible under the existing Income-tax Act, 1961, shall be allowed.


Penalty: The penalty for non-disclosure of income or an asset located outside India will be equal to 3 times the amount of tax payable thereon, i.e., 90 percent of the undisclosed income or the value of the undisclosed asset. This is in addition to tax payable at 30%

Failure to furnish return or furnish correct information in the returns in respect of foreign income or assets shall attract a penalty of Rs.10 lakh.


Punishment: The punishment for willful attempt to evade tax in relation to a foreign income or an asset located outside India will be rigorous imprisonment from three years to ten years, apart from the penalty.

Failure to furnish a return (or furnish correct information) in respect of foreign assets and bank accounts or income will be punishable with rigorous imprisonment for a term of six months to seven years.


So, if the Government finds a tax evader, will he be punished immediately?

No, here is the catch! The Act  lays down the requirement of mandatory issue of notices to the person against whom proceedings are being initiated, grant of opportunity of being heard, necessity of taking the evidence produced by him into account, recording of reasons, passing of orders in writing, limitation of time for various actions of the tax authority, etc. Further, the right of appeal has been protected by providing for appeals to the Income-tax Appellate Tribunal, and to the jurisdictional High Court and the Supreme Court on substantial questions of law. (Note: Which means the process will take 10 years to complete; like any other case going on in India now)

To protect persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance, it has been provided that failure to report bank accounts with a maximum balance of upto Rs.5 lakh at any time during the year will not entail penalty or prosecution (Note: So, small time evaders, Cheers!)


One time compliance opportunity – The Bill also provides a onetime compliance opportunity for a limited period to persons who have any undisclosed foreign assets which have hitherto not been disclosed for the purposes of Income-tax. Such persons may file a declaration before the specified tax authority within a specified period, followed by payment of tax at the rate of 30 percent and an equal amount by way of penalty. Such persons will not be prosecuted under the stringent provisions of the new Act. It is to be noted that this is not an amnesty scheme as no immunity from penalty is being offered. It is merely an opportunity for persons to come clean and become compliant before the stringent provisions of the new Act come into force.

Having said that, I must compliment the Government for taking some action against Black money menace. Though they failed to convert grand speeches about black money into action, the proposed steps may act as a deterrent and reduce black money in the country.


Want to read the full text of the Bill? Download here.


Check press release on Highlights of the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 Introduced in Lok Sabha


Thought for the day

Earth provides enough to satisfy every man’s needs, but not every man’s greed – Mahatma Gandhi


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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]