Thousands of recipients of such bonds have encountered strict, but often ignored, provisions of the law that require mandatory disclosure of all foreign assets such as corporate ownership, assets and accounts with foreign banks, three individuals who know the development. said ET.
Nevertheless, many people hold such information due to ignorance of the law, slack in filing returns and fear that such statements may provoke more inquiries from the tax office.
But, there is a huge cost to such confidentiality, as many are discovering: 10 lakh fines a year under the Black Money Act (BMA) – so if a bank account was opened five years ago and has remained a “secret” since then, the basic fine will be 50 lakh pounds if the assessor can not convince the tax authorities.
“About 3,500 notices have been issued in Mumbai itself. None of these names are in the Panama, Pandora, HSBC leaks. But they have owned undisclosed foreign assets,” said a senior intelligence official.
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An individual is penalized even if the investment abroad was outside taxable income and funds were transferred through bank channels using the free cash payment system of the Central Bank of India which allows residents to invest $ 250,000 per year abroad.
Some of the policies relate to returning money that was transferred from another family member who has completed the individual LRS maximum of the year. If such transfers are not made as a “gift” to the family member, it could be interpreted as a “borrowing” – and consequently a breach – by the latter as LRS’s investments cannot be with credit.
“Based on the judgment in the case” Kanan Devan Hills Plantations Company Private Limited v. ACIT “, assessors can take the position that Indian tax law is a maze complex and it is very difficult for an individual to understand the various rules. However, this is not an excuse for non-compliance, “said Mitil Chokshi, head of Chokshi & Chokshi LLP, a tax, auditing and consulting firm.
For a decade, the “FA Plan” has been included in tax return forms for the declaration of foreign assets or accounts where the assessee is the legal owner, rightholder or beneficial owner.
“It is not possible to impose a penalty on foreign assets that are not reported in cases where banks’ deposits are below INR 5,000,000. (BMA presentation date) Reactions to such summonses will need the utmost attention at the end of the taxpayers’ term, as the consequences under the BMA are quite severe. ” said Ashish Mehta, a partner at Khaitan & Co.
This time, the policies are not the traditional fishing expedition notices previously issued by the IT department. Everyone is asked about specific properties. Most of the policies are from the information technology research room, while some have been published by ED, according to a senior certified public accountant.
“These notices have been issued on the basis of foreign suspicious transactions reported by the financial intelligence service. The notifications have been sent to assessors as well as the relevant foreign jurisdiction,” said another tax official who requested anonymity. “Also in view of the interim action plan recently shared by the CBDT, the department has also been asked to prioritize foreign assets. Initial notifications have been sent under Section 131 of the Information Technology Act. Only if any special evasion is detected can we apply black money later. levels, “the official added.
The questions asked to assessors are: the nature of their operations in India, information on repayments abroad, financial interest in companies abroad, income tax on these assets, names of foreign service providers and bank statements of offshore companies (if the assessor is a significant shareholder).
Offshore assets would boil over to the ED domain if it turns out that funds have been transferred through the hawala route, or a foreign bank account has been financed by another party.
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