Income Tax

PMGKY Yojana 2016 Income tax Disclosure-Immunity Scheme with 50 % tax and lock in of 25% income. New penalty provisions introduced

PMGKY Yojana 2016 Income tax Disclosure-Immunity Scheme with 50 % tax and lock in of 25% income. New penalty provisions introduced.

PMGKY Scheme 2016 is applicable from 17-12-2016 Read Notification Click Here >>

No 200% penalty if income is declared u/s 115BBE and tax+ surcharge is paid @ total 75% of income >>

Ministry of Finance

8-November, 2016

Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill.

Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs.1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India.

Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

Further, 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 so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.

In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

An overview of the amendments proposed in the Bill are placed below;

Overview of Amendments Proposed         

PARTICULARS EXISTING PROVISIONS PROPOSED PROVISIONS
General provision for penalty PENALTY (Section 270A)

Under-reporting – @50% of tax
Misreporting – @200% of tax (Under-reporting/ Misreporting income is normally difference between returned income and assessed income)

No changes proposed
Provisions for taxation & penalty of unexplained credit, investment, cash and other assets  

TAX  (Section 115BBE)
Flat rate of tax @30% + surcharge + cess

(No expense, deductions, set-off is allowed)

TAX  (Section 115BBE)
Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx.
(No expense, deductions, set-off is allowed)
PENALTY (Section 271AAC)
If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.
 Penalty for search  seizure cases  

Penalty (271AAB)
(i) 10% of income, if admitted, returned and taxes are paid

(ii) 20% of income, if not admitted but returned and taxes are paid
(iii) 60% of income in any other case

Penalty (271AAB)
(i) 30% of income, if admitted, returned and taxes are paid

(ii) 60% of income in any other case
Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)  New Taxation and Investment Regime Undisclosed income in the form of cash & bank deposit can be declared:
(A) Tax, Surcharge, Penalty payable
Tax             @ 30% of income declared

Surcharge  @ 33% of tax
Penalty       @10% of income declared
Total            @50% of income (approx.)
(B)  Deposit
25% of declared income to be deposited in interest free Deposit Scheme for four years

                                              

Download The taxation Laws (Second Amendment) Bill 2016 as introduced in Lok Sabha- Click Here >>

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