As India gears up for reporting under the Common Reporting Standard (CRS), the Finance Bill 2016 sees India’s walk towards transparency continue further.
Last year saw the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (popularly referred to as the Black Money Act) introduced and now the government’s focus turns inward.
India’s budget on 29 February 2016 announced an amnesty for Indian Nationals to come forward and regularise any previously undisclosed income and assets. Whilst the amnesty last year for foreign income and assets was widely considered by the industry to be draconian in its terms, this disclosure opportunity appears to be somewhat more palatable.
Individuals making a disclosure under this one-off amnesty will be required to pay tax at 30% on the undisclosed income, with a 25% ‘cess’ and a 25% penalty on the tax amount. The ‘cess’ amounts collected will be referred to as ‘Krishi Kalyan’ and will be used for agriculture and the rural economy. The net effective rate will be a 45% levy.
Arjun Jaitley, India’s Finance Minister explained that there would be a ‘limited period Compliance Window’ running from 1 June 2016 to 30 September 2016.
India is also one of the early adopter nations under the CRS, and will report for the calendar year 1 January 2016 to 31 December 2016 by September 2017. The Indian Finance Minister has stated that “we are now going to act against whoever has undisclosed income overseas.”
Hetal Sanghvi, Senior Associate in Edwin Coe’s Tax team comments: “It is really positive to see India walking in the right direction, though I hope sufficient publicity is given to the automatic exchange of information India has committed to under CRS. What concerns me is whether financial institutions are prepared for the level of reporting India has committed to, individuals are even less aware of the level of information to be reported and if this were better known, perhaps there would be an even greater push towards regularisation. I am hopeful that these measures encourage families to consider coming forward, so that they can plan for the future, with fully regularised assets. As the foreign exchange barriers come down, and the scope of foreign investment for Indian Nationals broadens, it is my view that a transparent India will be far better placed in the global arena.”
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