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  3. Finance Minister introduces Taxation Laws (Second Amendment) Bill, 2016

Finance Minister introduces Taxation Laws (Second Amendment) Bill, 2016

29 Nov 2016 Evaluate

Providing another window to people holding black money, to disclose their unaccounted cash, Union Finance Minister Arun Jaitley has introduced the Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha, which aims to impose higher rate of tax and penalty in certain incomes and proposes a new voluntary disclosure and investment scheme, named Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016.

The amendment bill has proposed to levy a total tax, penalty and surcharge of 50 per cent on the amount deposited post-demonetisation, while higher taxes and stiffer penalty of up to 85 per cent await those who don't disclose but are caught. The declarant under this scheme shall be required to pay tax at the rate of 30% of the undisclosed income, and penalty at the rate of 10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ at the rate of 33% of tax is also proposed to be levied.

In addition to tax, surcharge and penalty (totaling to approximately 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’. The amount is proposed to be utilized for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood, so that there is justice and equality. The Taxation Laws (Second Amendment) Bill, 2016 proposes to amend Section 115 BBE of the Income Tax Act to provide for a punitive tax, surcharge and penalty on unexplained credit, investment, cash and other assets.

PMGKY will be notified after the Bill is passed by Parliament and receives Presidential Assent. Those with unaccounted incomes who do not opt for PMGKY could have it rough: any unexplained credit (including in bank accounts) will attract 60 per cent tax plus 25 per cent surcharge and 10 per cent penalty, making it an effective rate of 85 per cent.

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