An amnesty scheme for black money comes as a package enabling black income holders to convert their black income into white money by paying just the tax rate. But it will be a disincentive to the honest tax payers. Hence a punishment in the form of a penalty is imposed on people who reveal black income.
The previous Voluntary Disclosure of Income Scheme (1997) lacked this punishment/penalty. Several criticisms were levelled against it. In 1998, the Attorney General made a promise to the Supreme Court (after the VDIS 1997, which was an amnesty scheme) that it will not introduce an amnesty scheme in future. The court has observed that such a scheme adversely affects the morale of the honest tax payers. So under the IDS 2016, the 7.5% penalty doesn’t make look like an amnesty scheme as it penalizes the dishonest.
Following are the main features of the domestic black money amnesty scheme
- The tax rate will be 45%. The tax rate includes 30% tax plus 7.5% surcharge (Krishi Kalayan Surcharge) plus a penalty of 7.5%.
- The main part is the penalty of 7.5%.
- There is a Limited Period Compliance Window of four months from June 2016 to September 2016 to disclose black money.
- In the next two months, the tax should be paid.
- There is no scrutiny under the income tax Act, Wealth Tax Act
- There is no prosecution and no enquiries as well about the black money revealed.
In the case of investment assets, the Fair Market Value as on 1st June 2016 shall deemed to be the undisclosed income under the Scheme.