PRESENTED BYCA P C MALOO JAIN PSA JAIN

PRESENTED BYCA P. C. MALOO (JAIN) PSA JAIN & CO. 26, MAHALAXMI MARKET PANDRI, RAIPUR 1

STATEMENT OF OBJECTS AND REASONS 1. Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programs. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter reerred to as specified bank notes) issued by the Reserve Bank of India have been ceased to be legal tender with effect from the 9 th November, 2016. 2. Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 could possible be used for concealing black money. It is, therefore, important that the Government amends the Act to plug these loopholes as early as possible so as to prevent misuse of the provisions. The Taxation Laws (Second Amendment) Bill, 2016 proposes to make some changes in the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. Continued…. 2

3. In the wake of declaring specified bank notes as not legal tender, there have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy. Thus, money coming from additional revenue as a result of the decision to ban Rs 1000 and Rs 500 notes can be utilised for welfare schemes for the poor. 4. Therefore, an alternative scheme namely, the ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) is proposed to be provided in the Bill. The declarant under this regime shall be required to pay tax @30% of the undisclosed income and penalty @10% of the undisclosed income. Further, a surcharge to be called “Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax surcharge and penalty, the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the Central Government in consultation with the Reserve Bank of India under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the programmes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc. ; so that there is justice and equality. 5. The Bill seeks to achieve the above objectives.

Section 115 BBE (DETERMINATION OF TAX IN CERTAIN SPECIAL CASES) Existing Amended Where the total Income of an assesse includes any income referred to in section 68, 69 A, 69 B, 69 C or section 69 D, the income tax payable shall be the aggregate of (a) The amount of income-tax calculated on income referred to in section 68, 69 A, 69 B, 69 C or section 69 D, @30% (I) Where the total income of an assesse (a) Includes any income referred to in section 68, 69 A, 69 B, 69 C or 69 D and reflected in the return of income furnished under section 139. or (b) Determined by the A. O. includes any income referred to in section 68, 69 A, 69 B, 69 C or 69 D, if such income is not covered under clause(a) The income tax payable shall be the aggregate of(i) The amount of income-tax calculated on the income referred to in clause (a) and (b) @60%, and (ii) The amount of income tax which the assessee would have been chargeable had his total income has been reduced by the amount of income referred to in clause (i) (a) The amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause(a)

Section 271 AAB (PENALTY IN SEARCH CASES) Existing (1) The A. O. may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1 st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a). A sum computed @10%, of the undisclosed income of the specified previous year, if such assesseei). In the course of the search, in a statement under sub-section(4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived, ii) Substantiates the manner in which the undisclosed income was derived, and Insertion of New Sub-Section (1 A) The A. O. may, not withstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him(a) A sum computed @30% of the undisclosed income of the specified previous year, if the assessee(i) In the course of the search , in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) Substantiates the manner in which the undisclosed income was derived, and Continued…. 2

Section 271 AAB (PENALTY IN SEARCH CASES) Existing Insertion of New Sub-Section (1 A) iii) On or before the specified date(A) pays the tax, together with interest, if any, in respect of the undisclosed income, and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein. (iii) On or before the specified date (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income there in b) A sum computed @20%, of the undisclosed income of the specified previous year, if such assessee(i) in the course of the search, in a statement under sub-section(4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date(A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (b) A sum computed @60% of the undisclosed income of the specified previous year, if it is not covered under the provisions of clause (a) Continued…… 3

Section 271 AAB (PENALTY IN SEARCH CASES) Existing c) A sum which shall not be less than 30% , but which shall not exceed 90%, of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). Insertion of New Sub-Section (1 A) No Corresponding provision.

Insertion of New section 271 AAC (1) The A. O. may, notwithstanding anything contained in this Act other than the provisions of section 271 AAB, direct that, in a case where the income determined includes any income referred to in section 68, 69 A, 69 B, 69 C or 69 D for any previous year, the assesse shall pay by way of penalty, in addition to tax payable under section 115 BBE, a sum computed @10% of the tax payable clause (i) of sub-section (1) of section 115 BBE Provided that no penalty shall be levied in respect of income referred to in section 68, 69 A 69 b, 69 C or 69 D to the extent such income has been included by the assesse in the return of income furnished u/s 139 and the tax in accordance with the provisions of clause (i) of sub-section (1) of section 115 BBE has been paid on or before the end of the relevant previous year. (2) No penalty under the provisions of section 270 A shall be imposed upon the assesse in respect of the income referred to in sub-section (1) (3) The provisions of section 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. ”

Comparative study of existing viz-a-viz amended provision Section 115 BBE a. Tax/SC/ Penalty Where the total income of an assesse includes any income Tax referred in section 68, 69 A, 69 B, 69 C or 69 D and reflected in the return of income furnished u/s 139 SC Penalty Total Tax/SC/Penalty a. Where the total income determined by the A. O. includes any Tax income referred in section 68, 69 A, 69 B, 69 C or 69 D (Not covered by above (a)) SC Penalty u/s 271 AAC Total Tax/SC/Penalty Amended Existing 60% of income referred 30% of income referred 25% of Tax NIL 75% 60% of income referred 12% of Tax NIL 33. 6% 30% of income referred 25% of Tax 10% of Tax Payable 82. 5% 12% of Tax NIL 33. 6%

Comparative study of existing viz-a-viz amended provision U/s 271 AAB(1 A) w. e. f the date on Penalty in search cases which TLAB receives assent of President a. The assesse, in the course of search, in a statement u/s 30% of UDI 132(4) admits the undisclosed income and specify the manner in which such income is derives and pay the tax before specified date b. If the undisclosed income is not covered under the above 60% of UDI provision (a) c. A sum which shall not be less than 30% , but which shall NIL not exceed 90%, of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). Income Tax 30% / 60%of UDI SC 12% / 25% of Tax Total Tax and Penalty in case (a) 63. 6% / 105% Total Tax and Penalty in case (b) 93. 6% / 135% Total Tax and Penalty in case (c) U/s 271 AAB(1) Existing provision in effect 10% of UDI 20% of UDI Minimum 30% of UDI Maximum 90% of UDI 30% of UDI 12% of Tax 43. 6% 53. 6% 63. 6%/123. 6%

Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojna 2016 Effective from On such date as the Central Government may notify. Declaration of undisclosed income Section 199 C(1) May be made by any person on or after the date of commencement of this scheme but on or before a date to be notified by the Central Government in Official Gazette. Undisclosed income declared shall be chargeable to tax @30% of undisclosed income. Tax chargeable shall be increased by a surcharge @33% of tax. (i. e. 9. 9% of UDI) Penalty @10% of undisclosed income (Total tax/SC/Penalty shall be 49. 9% of UDI) Rate of Tax section 199 D(1) Rate of SC section 199 D(2) Penalty section 199 E Deposit section 199 F(1) Period of deposit section 199 F(2) Declaration to signed section 199 G To be deposited in the Pradhan Mantri Garib Kalyan Deposit Scheme-2016 to the extent of not less than 25% of undisclosed income. Deposit shall be allowed to be withdrawn after 4 years from the date of deposit which shall not bear any interest. By the person competent to verify the return u/s 140 of Income Tax Act.

Declaration to be filed (section 199 G) Before Principal Commissioner or the Commissioner in such form as may be prescribed Due Date for payment of tax Tax, surcharge and penalty shall be paid before filing of declaration. section 199 H(1) Due Date for Deposit of UDI section 199 H(2) Shall be deposited before the filing of declaration Section 199 I UDI declared shall not be included in the total income of the declarant for any Assessment Year Section 199 K Tax/SC/penalty is not refundable Scheme shall not apply section 199 O (a) Any person detained under the conservation of foreign exchange and prevention of smuggling Activities Act, 1974. (b) In relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988, the Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002. (c) To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. (d) In relation to any undisclosed Foreign Income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 01 December, 2016. PRESS RELEASE Sub: Clarifications with respect to Gold Jewellery under Income Tax Law In order to remove any doubt about the current position of Income Tax Law with respect to gold jewellery, the following points are categorically clarified: • There is no limit on holding of gold jewellery or ornaments by anybody provided it is acquired from explained sources of income including inheritance • Vide circular dated 11. 5. 1994, instructions have been issued in the matter of search and seizure of gold jewellery. • Jewellery and ornaments to the extent of 500 gms for married lady, 250 gms. for unmarried lady and 100 gm for male member will not be seized, even if prima facie, it does not seem to be matching with the income record of the assesse. • Officer conducting search has discretion not to seize even higher quantity of gold jewellery based on factors including family customs and traditions. (Meenakshi J. Goswami) Commissioner of Income Tax (Media and Technical Policy) Official Spokesperson, CBDT.

CBDT Instruction 1994 dated 11 -05 -1994 Instances of seizure of jewellery of small quantity in the course of operation under section 132 have come to the notice of the Board. The question of a common approach to situation where search parties come across items of jewellery has been examined by the Board and following guidelines are issued for strict compliance. • In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need to be seized. • In the case of a person not assessed to wealth-tax gold jewellery and ornaments to the extent of 500 gms. per married lady 250 gms per unmarried lady and 100 gms. per male member of the family, need not be seized. • The authorized officer may having regard to the status of the family and the customs and practices of the community to which the family belongs and other circumstances of the case, decide to exclude a larger quantity of jewellery and ornaments from seizure. This should be reported to the Director of Income-tax/Commissioner authorising the search all the time of furnishing the search report. • In all cases, a detailed inventory of the jewellery and ornaments found must be prepared to be used for assessment purposes.

U O Y K THAN PRESENTATION BY- CA P. C. MALOO PSA JAIN & CO. 26, MAHALAXMI MARKET PANDRI, RAIPUR 15