An expatriate in India should take proper professional advice that whether he upgraded to the status of resident and ordinarily resident in India over the period of stay in India from that earlier status of resident but not ordinary resident or either non- resident. An expatriate may face an encounter with the black money Act for not making proper disclosure as required by the Act and for not filing the return of income in a proper manner as required by the section 139 of the Income Tax Act and for not making the required disclosures as required by the law. An expatriate must ensure about his or her tax status under the Indian tax law while making the disclosure under the income tax returns. The moment an expatriate becomes an ordinary resident he become obliged to disclose the details of details of all foreign income and assets. An expatriate on achieving a status of an ordinary resident becomes liable to disclose both India income and foreign income earned during the previous year.
To know more about residential status read
Hence an expatriate must be aware of the following provisions of the Black Money Act;
Government since its formation was serious about to legislate a comprehensive new law on black money. Especially the money and assets which are earned accrued and accumulated outside India and unreported and undisclosed in India for tax purposes. On 20th March 2015, the Undisclosed Income and Assets (imposition of tax) Bill ,2015 was introduced in the parliament. The object of the bill was to curb the black money and undisclosed foreign assets and income and impose tax and penalty on such income. The bill was passed by both the houses of the parliament and became an Act after receiving the assent of the president on 26th May, 2015. A new act called as “Black money (Undisclosed foreign Income and assets) and Imposition of tax Act 2015 commonly called as ‘’The Black Money Act” came into force from 1st July 2015 onwards.
Some salient features of the act are as follows which an expatriate must know;
- It provides for separate taxation of any undisclosed income in relation to the foreign income and assets. It inter alia levies tax on undisclosed assets held abroad by a person.
- For above mentioned purposes person means a person who is resident in India as per the Income Tax Act other than not ordinary resident in India. It covers an expatriate also who becomes an ordinary resident In India.
- The act inter alia seeks to tax undisclosed tax held outside India by a person (which may include an expatriate at the rate of 30% of value of such assets.
- The act further provides that no exemption, deduction, set off, carry forward etc. will be allowed which may be allowed under the provisions of Income Tax Act.
- It also provides for charging of interest if the return of income as required by the income tax act is not furnished as well as interest for not paying the advance tax.
- It inter alia provides for a penalty equal to 90% of value of Undisclosed income or assets and also provides for rigorous imprisonment of three to ten years for wilful attempt to evade tax in relation to undisclosed foreign income or asset.
Undisclosed foreign Income & Undisclosed foreign assets
As per act undisclosed foreign income means an income which is earned from a source located outside India and the same is not reported in the return of income of the relevant year furnished under the income tax provisions or in respect of which income tax return was to be furnished but the same is not filed within the time limit as enumerated under the provisions of Income tax Act.
Undisclosed foreign asset mean an asset (including financial interest in any entity) located outside India which is held in the name of the taxpayer /where the taxpayer is the beneficial owner. As per the Act, a foreign asset shall be treated as undisclosed if the taxpayer is not able to explain the source of the investment in such asset or explanation, offered, in the tax authorities opinion, is not satisfactory. Such undisclosed assets will be chargeable to tax on the basis of their fair market value. The valuation of such assets shall be as per the rules prescribed. Such assets will be taxable in the year in which the same comes to the notice of the Income tax authority.
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