GOVERNMENT OF INDIA

MINISTRY OF FINANCE (DEPARTMENT OF REVENUE)

New Delhi, the 16th December, 2016

NOTIFICATION

S.O. 4058(E).— In exercise of the powers conferred by sub-section (2) of section 199A and sub-section (1) of section 199C of the Finance Act, 2016 (28 of 2016), the Central Government hereby appoints,—

(i) the 17th day December, 2016, as the date on which the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 comes into force; and

(ii) the 31st day of March, 2017 as the date on or before which a person may make a declaration under sub-section (1) of the said section 199C.

[Notification No. 115/2016, F.No.142/33/2016-TPL

(Dr. T.S. Mapwal)

Under Secretary to the Government of India

The following Act of Parliament received the assent of the President on the 15th December, 2016, and is hereby published for general information:—

 This Act may be called the Taxation Laws (Second Amendment) Act, 2016.

[‘CHAPTER IXA covers TAXATION AND INVESTMENT REGIME FOR PRADHAN MANTRI GARIB KALYAN YOJANA, 2016 ]

Key Points about 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	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 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.) (B)  Deposit 25% of declared income to be deposited in interest free Deposit Scheme for four years.

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Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana 2016

New Taxation Bill to tax undisclosed income introduced in Lok Sabha by India -PMGKY  -Govt Press Release 28.11.2016

The Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha on 28.11.2016 by Govt of India ; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has bee proposed in the Bill ‘CHAPTER IXA’ . Scheme is as follow

‘CHAPTER IXA

Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016

Short title and commencement.

199A. (1) This Scheme may be called the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

(2) It shall come into force on such date as the Central Government may, by notification, in the Official Gazette, appoint.

Definitions.

199B. In this Scheme, unless the context otherwise requires,—

(a) “declarant” means a person making the declaration under sub-section (1) of section 199C;

(b) “Income-tax Act” means the Income-tax Act, 1961;

(c) “Pradhan Mantri Garib Kalyan Deposit Scheme, 2016” (hereinafter in this Chapter referred to as “the Deposit Scheme”) means a scheme notified by the Central Government in consultation with the Reserve Bank of India in the Official Gazette; and

(d) all other words and expressions used in this Scheme but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act.

Declaration of undisclosed income.

199C. (1) Subject to the provisions of this Scheme, any person may make, 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, a declaration in respect of any income, in the form of cash or deposit in an account maintained by the person with a specified entity, chargeable to tax under the Income-tax Act for any assessment year commencing on or before the 1st day of April, 2017.

(2) 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 under sub-section (1) is made.

Explanation.— For the purposes of this section, “specified entity” shall mean—

(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.

Charge of tax and surcharge.

199D. (1) Notwithstanding anything contained in the Income-tax Act or in any Finance Act, the undisclosed income declared under section 199C within the time specified therein shall be chargeable to tax at the rate of thirty per cent. of the undisclosed income.

(2) The amount of tax chargeable under sub-section (1) shall be increased by a surcharge, for the purposes of the Union, to be called the Pradhan Mantri Garib Kalyan Cess calculated at the rate of thrity-three per cent. of such tax so as to fulfil the commitment of the Government for the welfare of the economically weaker sections of the society.

Penalty.

199E. Notwithstanding anything contained in the Income-tax Act or in any Finance Act, the person making a declaration under sub-section (1) of section 199C shall, in addition to tax and surcharge charged under section 199D, be liable to pay penalty at the rate of ten per cent. of the undisclosed income.

Deposit of undisclosed income.

199F. (1) Notwithstanding anything contained in the Income-tax Act or in any other law for the time being in force, the person making a declaration under sub-section (1) of section 199C, shall deposit an amount which shall not be less than twenty-five per cent. of the undisclosed income in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016.

(2) 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.

Manner of declaration.

199G. A declaration under sub-section (1) of section 199C 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.

Time for payment of tax, penalty, surcharge and deposit.

199H. (1) The tax and surcharge payable under section 199D and penalty payable under section 199E in respect of the undisclosed income, shall be paid before filing of declaration under sub-section (1) of section 199C.

(2) The amount referred to in sub-section (1) of section 199F shall be deposited before the filing of declaration under sub-section (1) of section 199C.

(3) The declaration under sub-section (1) of section 199C shall be accompanied by the proof of deposit referred to in sub-section (1) of section 199F, payment of tax, surcharge and penalty.

Undisclosed income declared not to be included in total income.

199-I. The amount of undisclosed income declared in accordance with section 199C shall not be included in the total income of the declarant for any assessment year under the Income-tax Act.

Undisclosed income declared not to affect finality of completed assessments.

199J. 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.

Tax, etc., not refundable.

199K. Any amount of tax and surcharge paid under section 199D or penalty paid under section 199E shall not be refundable.

Declaration not admissible in evidence against declarant.

199L. Nothwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under sub-section (1) of section 199C 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.

199M. Notwithstanding anything contained in this Scheme, where a declaration has been made by misrepresentation or suppression of facts or without payment of tax and surcharge under section 199D or penalty under section 199E or without depositing the amount in the Deposit Scheme as per the provisions of section 199F, such declaration shall be void and shall be deemed never to have been made under this Scheme.

Applicability of certain provisions of Income-tax Act.

199N. The provisions of Chapter XV of the Income-tax Act relating to liability in special cases and section 119, section 138 and section 189 of that Act shall, so far as may be, apply in relation to proceedings under this Scheme as they apply in relation to proceedings under the Income-tax Act.

Scheme not to apply to certain persons.

199-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 8, read with sub-section (2) of section 9, of the said Act; or

(iii) such 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.

Removal of doubts.

199P. For the removal of doubts, it is hereby declared that save as otherwise expressely provided in sub-section (1) of section 199C, 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.

Power to remove difficulties.

199Q. (1) If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty:

Provided that no such order shall be made after the expiry of a period of two years from the date on which the provisions of this Scheme come into force.

(2) Every order made under this section shall be laid before each House of Parliament.

Power to make rules.

199R. (1) The Board may, subject to the control of the Central Government, by notification in the Official Gazette, make rules for carrying out the provisions of this Scheme.

(2) Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—

(a) the form and manner of declaration and verification to be made under section 199G;

(b) any other matter which is to be, or may be, prescribed, or in respect of  which provision is to be made, by rules.

(3) Every rule made under this Scheme shall be laid, as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.’.

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