E-filing preferable to physical route while declaring illegal foreign assets

One of the concerns regarding the one-time settlement window under the Undisclosed Foreign Income and Foreign Assets Bill, 2015 (Black Money Act) is that the information could be misused. Tax payers are worried they could be subject to stringent scrutiny by assessing officers (AOs) on their income, assets, and bank accounts. According to experts, this problem can be addressed to some extent by filing directly, online or physically, with a separate cell and not through the regular procedure.

The sanctity of the information will be maintained. The information will not be leaked and AOs will not be able to use this information to ask questions about other assets or bank accounts of tax-payers,™™.

Under the one-time settlement window, tax payers have time till September 30 to declare their illegal foreign assets and income and till December 31 to pay the penalty and tax. The penalty and tax together is 60 per cent of the assets. After the window, those found with illegal assets will be charged 90 per cent penalty.

For the one-time settlement, tax-payers have to use Form 6. It can be done either physically or electronically. In case of e-filing, tax-payers will need to use a digital signature, which can be purchased from agencies that offer it for a fee. Without the digital signature the disclosure is not valid.

Tax-payers have to purchase the signature and register it with the I-T department before they can use it. The online route is preferable since it will be faster and tax payers don™t have much time at their disposal,™™.

In case of e-filing, the acknowledgment received is the final acknowledgment. There is no need to send the physical acknowledgment to the central processing centre.

Digital signatures can be purchased from private agencies by paying a fee and furnishing basic information such as PAN card, proof of identity and address. There are different varieties of digital signatures. For all statutory and tax compliance, usually it is Tier-II signature that is used. The signature is valid for two years from the date of purchase. It can also be used for any other purpose where a digital signature is valid, but remember to register with the agency or government body concerned,.

While steps such as e-filing will simplify the disclosure process, structural issues are still not addressed. For instance, the tax plus penalty rate of 60 per cent is too stiff. You effectively end up paying 150 per cent of the post-tax income. Then, the rule about disclosing details of all bank account and all deposits in the account, but not withdrawals, is confusing. And every single deposit need not mean it is income. Does one have to keep documentary evidence of all receipts? These issues require clarity.

Going ahead, the risk of lack of compliance will be greater as regulation and exchange of information between countries increases.

Hence, it is advisable to use the compliance window and declare foreign assets. But tax payers must also keep in mind that if they don’t pay the entire penalty plus tax amount before December 31, the compliance will not be considered valid. Similarly, if it is discovered that the tax payer had suppressed any information or shown incorrect calculation of the income or assets, then, too, the compliance will be not be considered valid..

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eMinds Legal

eMinds Legal is a Corporate Law Firm based in Gurgaon, India specializing in Corporate Legal, Corporate Secretarial and Compliance. The Firm comprises of a team of Corporate Lawyers and Company Secretaries with in-depth subject matter knowledge and participative industry experience of over 15 years.

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