A new bill to deal with black money parked abroad that the government is planning to bring in the current session of Parliament is likely to be influenced by the law in the United States to check unaccounted overseas wealth, and perhaps will tun out to be even more stringent.
The finance ministry is giving the final shape to the proposed bill which will take into consideration the recommendations of the Supreme Court-appointed Special Investigation Team (SIT), and the Foreign Account Tax Compliance Act (FATCA) of the US.
“We have to see how the two can be woven together and incorporated in the Indian law,” a senior government official said. He said the legislations prevalent in other developed countries are also being studied.
Finance Minister Arun Jaitley in his Budget speech on February 28 had said that the new law would make penalties on tax evasion stricter, thereby discouraging evaders from parking money overseas. According to the proposed law, evasion of taxes in connection with foreign assets will result in a punishment of up to 10 years of rigorous imprisonment. It will also provide for a penalty for such concealment of income and assets at the rate of 300 per cent of the tax, while offenders will not be permitted to approach the Settlement Commission.
The FATCA was enacted in 2010. FATCA requires US taxpayers holding foreign financial assets with a value exceeding $50,000 to report that information on a new form (Form 8938) that must be attached to the taxpayer’s annual tax return. Failure to report will result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure).
Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional penalty of 40 per cent. Apparently, FATCA doesn’t free US taxpayers from the provisions of the US Bank Secrecy Act which requires them to file a Report of Foreign Bank and Financial Accounts (FBAR). Failure to file an FBAR could mean fines up to $500,000 and prison term up to ten years.
One of the key features of the proposed Indian law too will be the mandatory filing of returns in respect of foreign assets. FATCA has provisions for exchange of information between countries about their unaccounted money parked in the banks of different countries. Under this, India will start getting information from the US about black money, starting 2017.
Revenue Secretary Shaktikanta Das confirmed to Deccan Herald that from 2017, access to information about black money will become easier.