Thursday, December 15, 2016


Pradhan Mantri Garib Kalyan Yojana, 2016 gives an opportunity to all the black money hoarders to come out clean by declaring their undisclosed income and paying heavy taxes and penalty. The provisions of scheme require declarants to pay
1. Tax @30% of the undisclosed income.
2. Penalty @10% of the undisclosed income.
3. Surcharge @33% on the amount of tax, which amounts to approximately 9.9 % of the undisclosed income.
The total amount payable will be 50% of undisclosed income .
Deposit: Apart from paying tax and penalty, the declarants will also be required to deposit 25% of the amount disclosed in the Pradhan Mantri Garib Kalyan Yojana, which will be interest free deposits locked in for a period of 4 years.
After analysing the provisions of the new scheme and the amendments made in the existing provisions of the Income Tax Law, a person holding black money is left with three options

  • Declaring income under PMGKY, by filling a declaration form attracting a tax of 50% (30% tax, 33% surcharge on tax, 10% penalty) and depositing an additional 25% of income in the Pradhan Mantri Garib Kalyan Yojana, 2016 (which is refundable after 4 years)
  • Declaring income, while filing the return of income under section 115 BBE [i.e. not declaring the
  • income in the PMGKY but declaring at the time of filing the return] attracting a tax of 75% (60% tax and 25% surcharge on tax). The rate of 75% is as per the amended section in Income Tax Law.
  • Not declaring income and taking chance with the Income Tax Department and attracting a tax of 85% (60% tax, 25% surcharge on tax and 10% penalty) when caught. In this case, prosecution provisions will also be applicable.

There is another aspect of the third option in case of applicability of Section 271AAB i.e. in case there is a search in the premises of the assessee, in addition to the above taxes and surcharge an additional penalty of 30% is payable , in case income is accepted during the search process and entire tax , interest and penalty is paid at the time of filing the block assessment return, failing which  the penalty under section 271AAB will be further increased by another 30%  i.e. penalty @ 60% on the undisclosed income.
It may be noted that in terms of section 271 AAB , the income accounted for in books of accounts at the time of search cannot be termed as undisclosed income and no penalty under section 271AAB can be levied, as the income is excluded from the definition of undisclosed income.

The applicability of section 115 BBE will be limited to cases which are covered by ambit of section Section 68, 69, 69A, 69B , 69C and section 69 D. These sections will cover cases where the income tax officer "Found" or voluntarily so declared by the assesse.


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