Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana 2016
- Disclosure of black money held in banks or cash
Background of Pradhan Mantri Garib Kalyan Yojana 2016 :In the wake of declaring specified bank notes of Rs 500/ Rs 1000 “as not legal tender” in India , 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.
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.
- Name of the Scheme : This Scheme may be called the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.
- Date of Commencement of Pradhan Mantri Garib Kalyan Yojana 2016 : It shall come into force on such date as the Central Government may, by notification, in the Official Gazette, appoint. Read Notification New Taxation Bill to Tax undisclosed Income received assent of President ,
- Tax Payable under Pradhan Mantri Garib Kalyan Yojana 2016 : The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income. [section 194D(1)] .Amount of Tax paid shall not be refundable. [Section 199K]. Declaration has to be filed in Form 1. [ Form 1 PMGKY 2016 -Download /Print ] . PMGKY Tax Challan has to be deposited in ITNS 287 . Click to Pay Challan ITNS 287 Online.
- Penalty Payable under Pradhan Mantri Garib Kalyan Yojana 2016 :The declarant under this regime shall be required to pay penalty @10% of the undisclosed income.[section 194E] . Amount of penalty paid shall not be refundable. [Section 199K]
- Surcharge Payable under Pradhan Mantri Garib Kalyan Yojana 2016 : The declarant under this regime shall be required to pay a surcharge to be called ‘ Pradhan Mantri Garib Kalyan Cess ’ @33% of tax.. [section 194D(2)] .Amount of Surcharge paid shall not be refundable. [Section 199K]
Black money deposited in banks or held in cash can be offered for taxation at concessional rate under Pradhan Mantri Garib Kalyan Yojna, 2016 (‘PMGKY’). This income would be taxed at 49.9% (i.e., 30% tax, 9.9% surcharge and 10% penalty).
- Lock in Period of Deposit under Pradhan Mantri Garib Kalyan Yojana 2016 : 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 ’ [Read Pradhan Mantri Garib Kalyan Deposit Scheme 2016 Notified by Govt w.e.f 17.12.2016] . This amount shall be deposited before the filing of declaration. Download Application form for Pradhan Mantri Garib Kalyan Deposit Scheme 2016 ,Download Form III Nomination- Pradhan Mantri Garib Kalyan Deposit Scheme 2016
- The deposit shall bear no interest and the amount deposited shall be allowed to be withdrawn after four years from the date of deposit and shall also fulfil such other conditions as may be specified in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016.[section 194F]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.
- PMGKDS 2016- Co-operative Banks not authorised to accept deposits – Notification
- 12 FAQ’s on PMGKY 2016 released by CBDT
- Time for making declaration under Pradhan Mantri Garib Kalyan Yojana 2016 : Any person may make declaration on or after the date of commencement of this Scheme but on or before a date to be notified by the Central Government in the Official Gazette.
- What can be declared under Pradhan Mantri Garib Kalyan Yojana 2016 : Any person may make, a declaration in respect of any income, in the form of cash or deposit in an account maintained by the person with following specified entity, chargeable to tax under the Income-tax Act for any assessment year commencing on or before the 1st day of April, 2017.
(i) the Reserve Bank of India;
(ii) any banking company or co-operative bank, to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act);
(iii) any Head Post Office or Sub-Post Office; and
(iv) any other entity as may be notified by the Central Government in the Official Gazette in this behalf.[section 199C (1)]
- No Deduction of Expenses etc under Pradhan Mantri Garib Kalyan Yojana 2016 :No deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed against the income in respect of which a declaration is made under this scheme.[section 199C (2)]
- Declaration to whom under Pradhan Mantri Garib Kalyan Yojana 2016 :A declaration shall be made by a person competent to verify the return of income under section 140 of the Income-tax Act, to the Principal Commissioner or the Commissioner notified in the Official Gazette for this purpose and shall be in such form and verified in such manner, as may be prescribed. (yet to be prescribed)
- Time for payment of tax, penalty, surcharge and deposit. The tax and surcharge penalty payable in respect of the undisclosed income, shall be paid before filing of declaration.The declaration shall be accompanied by the proof of deposit of payment of tax, surcharge and penalty
- Undisclosed income not to be included in total income : The amount of undisclosed income declared in accordance with section 199C of this scheme shall not be included in the total income of the declarant for any assessment year under the Income-tax Act.
- No Reopening of Assessment :- A declarant under this Scheme shall not be entitled, in respect of undisclosed income referred to in section 199C or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957, or to claim any set-off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment.
- Declaration not admissible in evidence against declarant : Nothing contained in any declaration made shall be admissible in evidence against the declarant for the purpose of any proceeding under any Act other than the Acts mentioned in section 199-O.
- Declaration by misrepresentation of facts to be void. where a declaration has been made by misrepresentation or suppression of facts or without payment of tax and surcharge or penalty or without depositing the amount in the Deposit Scheme (i.e@25% ), such declaration shall be void and shall be deemed never to have been made under this Scheme.
- Pradhan Mantri Garib Kalyan Yojana 2016 not to apply to certain persons :[Section 99-O] The provisions of this Scheme shall not apply—(a) in relation to any person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974:Provided that—
(i) such order of detention, being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has not been revoked on the report of the Advisory Board under section 8 of the said Act or before the receipt of the report of the Advisory Board; or
(ii) such order of detention, being an order to which the provisions of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub-section (3) of section 9, or on the report of the Advisory Board under section order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under sub-section (3) of that section, or on the basis of the report of the Advisory Board under section 8, read with sub-section (6) of section 12A, of the said Act; or
(iv) such order of detention has not been set aside by a court of competent jurisdiction;
(b) in relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002;
(c) to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992;
(d) in relation to any undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- No benefit, concession or immunity to Other person :-Nothing contained in this Scheme shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Scheme.
Disclosure of black money in return of income :-
If a person fails to make declaration as per above scheme, but file Income Tax Return for AY 2017-18 (i.e. for Financial Year 2016-17) declaring any unexplained income/investment, cash credit, etc. under section 68, 69, 69A, 69B, 69Cor 69D (say unexplained income) he shall be liable to pay income tax @60% of such unexplained income ( No expense, deductions, rsset-off is allowed) + surcharge @25% of tax ( i.e 15% of undisclosed income)+ Education Cess @ 3% of Tax = 77.25% Tax. (Section 115BBE ) . Thus, no penalty will be levied under Section 271AAC (newly proposed) if undisclosed income has been disclosed in return of income and tax has been paid on or before end of previous year.
- Such option is available for those taxpayers who are not eligible for PMGKY Scheme or those who wanted to declare black money in the form of gold, bullion or immovable property, etc
- Further, for such disclosure of black money, no penalty will be levied for under-reporting and misreporting of income under Section 270A.
Detection of black money by the Assessing Officer
- If any undisclosed income is determined by AO then it would be taxable at 83.25% (i.e., 60% tax, 15% surcharge, 6% penalty* and 2.25% Cess). Further, no penalty will be levied for under-reporting and misreporting of income under Section 270A..
- Note : Tax Penalty u/s 271AAC @ 10% of tax payable is computed on tax amount excluding surcharge and Cess.
- Unexplained income during a search admited:- If any person admits of any unexplained income during a search conducted under section 132, he shall be liable to pay penalty @30% of unexplained income admitted in addition to tax.[ Section 271AAB ]
- Unexplained income during a search not admited If any person refused to admits any unexplained income during a search conducted under section 132, he shall be liable to pay penalty @60% of unexplained income admitted in addition to tax.[ Section 271AAB ]
Overview of Amendments Proposed under Income tax Act
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
(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 InvestmentRegime 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.)
25% of declared income to be deposited in interest
free Deposit Scheme for four years.
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