In continuation of the discussion provoked by the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015 ( Black Money Act), which became effective in India on 1 July 2015, it is worth noting that the amnesty window will close on 30 September 2015 as things stand.
Therefore, 30 September 2015 will be the last date to declare previously undisclosed foreign income and assets by undertaking to pay 60 percent as tax and penalty.
Key scenarios that are worthwhile to consider in more depth and where the Government of India has provided an indication of its intent through clarifications are summarized below.
| # | Key Scenario | Clarification |
| 1. | Whether a beneficiary of
an undisclosed foreign asset needs to make declaration under the
one-time window. |
Yes. |
| 2. | A person is a resident
now. However, he was a non-resident earlier when he had acquired
foreign assets (which he continues to hold now) out of the income
that was not chargeable to tax in India. Does the person need to
file a declaration in respect to those assets under the one-time
window scheme? |
No. The foreign assets, which were acquired at the time when the person was non-resident, do not fall under the definition of undisclosed assets and, therefore, are not required to be declared under the one-time window scheme. |
| 3. | Where a foreign asset
has been acquired partly out of undisclosed income chargeable to
tax and partly out of disclosed income / exempt income, then is it
necessary to make a voluntary declaration under the one-time window
scheme in respect of such asset? If yes, what amount should be
disclosed? |
Yes. The amount of declaration shall be the fair market value of such asset less the amount computed in accordance with the Black Money Act. |
| 4. | A resident earned income
outside of India that has been deposited in his foreign bank
account. The income was taxed in the foreign country when it was
earned, but the same was not declared in the return of income in
India and, consequently, was not taxed in India. Does he need to
disclose such income under the one-time window scheme? Will he get
credit for foreign taxes paid? |
The person may declare
the foreign bank account, and the valuation will be as per the
rules prescribed in the Black Money Act. No credit of foreign taxes
paid shall be allowed. |
| 5. | A person inherited a
house property in 2003-2004 from his father, who passed away. Such
property was acquired from an unexplained source of investment. The
property was sold by the person in 2011–2012. Does he need to
declare such property under the one-time window scheme? If yes,
then what will be the fair market value
(FMV) of such property for the purpose of
declaration? |
Yes, the person may
declare such property under the one-time window scheme in the
capacity of being a legal representative of his father. The value
of the property should be the FMV determined as per the Black Money
Act. |
| 6. | A person acquired a
house property in a foreign country during the year 2000–2001
from an unexplained source of income. The property was sold in
2007–2008 and the proceeds were deposited in a foreign bank
account. Does he need to declare both the assets under the one-time
window scheme and pay tax on both the assets? |
The declaration may be
made in respect of both the assets, i.e., house property
and the bank account, at his FMV determined in accordance with the
prescribed rules. The FMV of the house property shall be: The higher of the cost price and the sale price of the property less the amount deposited in the bank account. Tax and penalty shall be payable on this amount in respect of the undisclosed house property. The FMV of the bank account shall be determined as per the Black Money Act and tax and penalty shall be payable on this amount. |
| 7. | Can a person against whom a search / survey operation has been initiated file voluntary declaration under the one-time compliance scheme? | No. |
Several variations of these scenarios may not be covered by the clarifications detailed above that could require a fresh look at the underlying structures.
If you have any questions about the topics discussed in this Alert, please contact Saionton Basu in Duane Morris' London office, any of the attorneys in our India Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
