What is Black Money

In the recent past, all of you must have heard of Black Money discussions in the media and press, and how , many wealthy people evade payment of taxes and keep them overseas. Before we get into the provision of law, the first question which arises is, what is Black Money ?

Black money is the money on which legitimate taxes , due on such income, have not been paid in India. Such income may either be the undisclosed income in India, or undisclosed income outside India, on which no income-tax has been paid in India. However, the Black Money Act , covers only foreign sourced income like, undisclosed bank accounts outside India, undisclosed property outside India, undisclosed shareholding in foreign company, etc. The provisions of Income-Tax Act would be applicable on undisclosed Indian sourced income.

Black Money may consist of income generated from legitimate activities,  or activities which are illegitimate per se, like smuggling, illicit trade in banned substances, counterfeit currency, arms trafficking, terrorism, and corruption.

In 2016, the Government had launched Income Declaration Scheme for tax evaders to come clean and declare their black money stashed abroad. For such purpose, the Government had opened compliance window of four months. The income declared under this scheme was taxed at the 45 %.  However, for person who did not opt for this   opportunity , undisclosed income will now be taxed as per the provisions of the Black Money Act .

OBJECTIVES AND FEATURES OF THE BLACK MONEY ACT 

The objective of the Black Money Act are to –

• Deal with the problem of the Black money , which may comprise of undisclosed foreign income and /or undisclosed foreign assets ;
• Make procedures for dealing with such undisclosed foreign income and undisclosed foreign assets ;
• Imposing tax on any undisclosed foreign income and undisclosed foreign assets held outside India ; and
• Provide for matters connected therewith, or incidental thereto, like collection and recovery of tax, exchange of information, etc.

APPLICABILITY AND COVERAGE OF THE BLACK MONEY ACT – SECTION 1

The Black Money Act is applicable from July 1, 2015 . It extends to whole of India (Including J&K).  It would be applicable for undisclosed foreign assets acquired prior to July 1, 2015 , where such asset is discovered by the AO,  on or after July 1, 2015.  For example, a taxpayer may have acquired any property outside India say in 1990 from undisclosed income .  Such property is discovered by the AO in 2018, which is after the date when the BMA is applicable. In such a case,   the provisions of the Black Money Act would be applicable to tax such undisclosed foreign property. This aspect has been explained in detail in Section 3 of the Black Money Act of this book.

NOTE – For the purpose of the BMA, all words and expressions, which are not defined in the Black Money Act , but are defined in the Income-Tax Act , 1961 (“IT Act”) shall have the meanings , which are respectively assigned to them in the Income-Tax Act.

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