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Wednesday, November 30, 2016

Amendment Bill :Income tax at 50% of the undisclosed income

Finance Minister Mr. Arun Jaitley introduced an amendment bill for Income Tax law On 28 November 2016.  

According to this amended bill, who declared his undisclosed income or Black Money since the ban on Rs. 500 and Rs. 1 000 has announced will have to pay 30% tax of the undisclosed income.

Along with 30% tax 10% penalty will also be imposed on Undisclosed Income and Surcharge (PMGK Cess) of 33% of tax amount (33% of 30% of Undisclosed Income).  

Moreover, declarants have to deposit 25% of undisclosed Income after demonetisation in the Pradhan Mantri Garib Kalyan Yojna.

·         Income tax at 30% of the undisclosed income,

·         Penalty at 10% of the undisclosed income.

·         Further, a surcharge to be called Pradhan Mantri Garib Kalyan Cess at 33% of tax is also proposed to be levied.

·         Totalling to about 50%
·          
·         In addition to tax, surcharge and penalty (totalling to about 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’. No interest will be paid to the owner for this. After four years the owner can reclaim his money (25%).                                                 
For Undisclosed income of Rs. 5 lakh

·         Income Tax at 30% of the undisclosed income, Tax will be Rs. 1.5 lakh

·         Penalty at 10% of the undisclosed income,  penalty will be Rs. 50,000.

·         Surcharge at 33% of income tax  that is 33% of Rs. 1.5 lakh will be Rs. 49,500,

·         Total income tax & penalty payable: Rs. 2,49,500
·          
And above that 25% of undisclosed income in a Deposit Scheme  that is Rs. 1.25 lakh will be locked in for 4 (four) years without accruing any interest.
What is Penalty for those who continue to hold Undisclosed  Income ?

The people who continue to hold undisclosed cash and if they caught
·         Flat 60% tax plus Surcharge of 25% of tax amount, as per the amended Income Tax law. Tax Under Section 115BBE
·          
·         Besides above charges, if assessing officer feels then he can impose additional 10% penalty to the 75% tax. For PENALTY under Section 271AAC
·          
·         Penalty for search/seizure cases : Penalty (271AAB)

·         Penalty for under-reporting on income is flat 50% tax and 200% tax on misreporting. And are no changes to them.
·          
How does tax on Undisclosed income compare to if one does not declare the Income and is caught?
For Tax Under Section 115BBE: Flat rate of tax at 60% + surcharge at 25% of tax (that is 15% of such income) + cess at 3% of tax & surcharge. So total incidence of tax is 77.25% approx. (No expense, deductions, set-off is allowed)

For Example: If Rs. 5 lakh is the unexplained credit, investment, cash and other assets, 60% tax is Rs. 3 lakh
·          Surcharge at 25% of tax (that is 15% of such income) that is Rs. 75,000
·         Plus cess at 3% of income  tax & surcharge Rs. 11,250

·         Which is equal to Rs. 3,86,250 lakh  that is 77.25% of unexplained credit, investment, cash and other assets
·          
For PENALTY (Section 271AAC) 

If Assessing Officer determines income referred to in section 115BBE, penalty at 10% of tax payable in addition to tax (including surcharge) of 77.25%.

Example of undisclosed income of  Rs. 5 lakh : In addition to Rs. 3.86.250 lakh, Rs. 30,000 is to be paid.
Total tax plus penalty: Rs. 4,16,250. This comes to 83.25% of the total unaccounted  income disclosed

Penalty for search/seizure cases : Penalty (271AAB)

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Example: Say, income undisclosed and thus seized or searched is Rs. 5 lakh.
(i) 30% of income, if admitted, returned and taxes are paid 30% of Rs. 5 lakh that is Rs. 1.5 lakh
(ii) 60% of income in any other case 60% of Rs. 5 lakh  that is Rs. 3 lakh
Where will the money for Pradhan Mantri Garib Kalyan Yojna be used
This locked into the Pradhan Mantri Garib Kalyan Yojna will be used for the Government projects of irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood in order to spread justice and equality.







Amendment Bill :Income tax at 50% of the undisclosed income Reviewed by S. Chitra on November 30, 2016 Rating: 5 Finance Minister Mr. Arun Jaitley introduced an amendment bill for Income Tax law On 28 November 2016.   According to this amended bill...

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