Basis of Charge – Section 3 – Black money act
The assesse shall be liable to pay income-tax at the rate of 30% in respect of any undisclosed foreign income and /or undisclosed foreign asset of the previous year.
Unlike the Income-Tax Act, the term ‘assessee’ for the purpose of the Black Money Act covers only ‘resident and ordinarily resident’ . A person who is resident but not ordinarily resident is not considered as an assessee for the purpose of BMA.
The “undisclosed foreign income” includes rental income from property situated outside India, interest income earned outside India, etc.
The term ‘Undisclosed foreign asset’ includes, undisclosed bank account situated outside India, undisclosed property situated outside India, undisclosed interest in a foreign Firm or LLP etc. [For details, refer definition of undisclosed foreign asset at Para 6 of this chapter]
NOTES : –
- The Black Money Act does not cover undisclosed Indian assets and undisclosed Indian sourced income like, undisclosed income from property situated in India, undisclosed income from business in India, undisclosed income in the form of other valuables, etc. The provisions of the IT Act would be applicable on such income and assets.
- In addition to 30% tax on undisclosed income and undisclosed foreign assets, assessee would also be liable to pay penalty of 300% of amount of tax evaded on such income or assets. [Discussed in Section 41 of the Black Money Act]
Basis of Charge – Section 3 – Black money act – Example 1
Mr. John, stayed in India for a period of 200 days during FY 2017-18. He has always stayed in India throughout his life and had never travelled abroad. However, he has filed income-tax returns with Nil taxable income until FY 2017-18. Based on certain information required during the search of XYZ Limited., his case is picked for scrutiny assessment for FY 2015-16. AO has discovered certain investment in house property situated in India, which Mr. John who was not able to explain in terms of the source of money through which such properties were acquired. You are required to comment whether such unexplained investment would be covered under the Black Money Act ?
SOLUTION
Mr. John, is a resident and ordinarily resident in India during the relevant financial year. The provisions of the Black Money Act, does not cover undisclosed Indian assets or Indian undisclosed income. Thus, such unexplained house property would be taxable @ 60% as per Section 115BBE of the Income-Tax Act . It would not be covered under the provisions of the BMA.
Basis of Charge – Section 3 – Black money act – Example 2
Mr. Raj, is a service provider in India . During the Previous Year 2016-17, he worked on assignment of foreign client , while he stayed in India . Mr. Raj did not disclose such income in his ITR . Whether provisions of the Black Money Act would be applicable on such income earned by Mr. Raj ?
SOLUTION
The provisions of Black Money Act do not apply to India sourced income . Hence, professional fee earned by Mr. Raj is not covered under the Black Money Act . However, provisions of income-tax Act would be applicable on such income.
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