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Black Money Bill: Any non-disclosed income or asset outside India will attract 90% penalty

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By Harshmeet Singh

Moving forward on its long standing commitment of bringing back the illicit Indian money concealed abroad, the Modi Government, on Friday, finally tabled a bill in the Lok Sabha which would cover such offences. Called the ‘The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015’, it would come into effect (if passed by the Parliament) beginning from 1st April, 2016.

The official statement before the introduction of the Bill said “In order to fulfil the commitment made by the Government to the people of India through the Parliament, the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 has been introduced in the Parliament on 20.03.2015.  The Bill provides for separate taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the proposed new legislation,”

Major provisions of the Bill

The Bill includes the following penalties to be levied upon Black money holders –

Any non-disclosed income or asset outside India would attract a penalty tax, which would be thrice the normal tax slab of 30%, making it 90%. Significantly, this penalty would be over and above the normal tax payable at 30%.

  • If the individual doesn’t furnish returns on his / her foreign income or asset (even if there is no taxable income), it would result in a penalty of Rs 10 lakh. However, undisclosed foreign accounts worth less than Rs 5 lakh won’t attract any penalty.
  • Apart from the hefty fines, the wilful offenders of tax evasion would also be slapped with a rigorous imprisonment for a period of 3 to 10 years.
  • If the person fails to furnish returns on the foreign assets and income held by him / her (even if there is no taxable income), it would attract a rigorous imprisonment for a period ranging from 6 months to 7 years.
  • Aiding or enticing in filing a false return or incorrect declaration would also result into a rigorous imprisonment for a period ranging from 6 months to 7 years. This clause is also applicable to the financial intermediaries and Banks who assist in such secrecy. The beneficial owners of the asset would also come under the purview of this provision.

Safeguards in the Bill

Following the principles of natural justice, as mentioned in our constitution, the proposed bill contains multiple provisions for ensuring that the accused gets enough chances to prove his / her innocence. The bill calls for obligatory issue of notices to the accused, a fair chance of being heard, providing orders in writing, acceptance of the evidence brought forth by him to prove his stand and much more. Furthermore, the accused would also have the right to appeal to the ‘Income tax appellate tribunal’, the concerned High Court and the Supreme Court, if needed.

To encourage voluntary disclosure, the bill also provides for a one time reprieve to all those who would be willing to voluntarily disclose their illicit money or assets stashed abroad. This provision is applicable only for a limited period wherein the person must disclose his / her foreign asset and file a declaration to the concerned tax authority by paying the legitimate tax and the penalty. Notably, this isn’t a pardoning clause since the person would still be slapped with the penalty in proportion to the undisclosed assets. However, the persons making voluntary disclosures won’t be prosecuted under the harsh provisions introduced in the Bill.

The bill also seeks to amend the Prevention of Money Laundering Act (PMLA) and bring ‘concealment of income and evasion of tax in relation to a foreign asset’ under its purview as a ‘predicate offence’. This move would empower the enforcement agencies to impound the foreign assets in question and begin its proceedings. The date of opening of the foreign account has also been made a mandatory disclosure under the proposed bill.

 

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Best Tax Saving Options for NRIs in A.Y. 2018-19

As an NRI, you are qualified for tax exemptions on specific investments in India

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  • NRIs are supposed to pay taxes to India as well
  • There are tips for this tax saving
  • NRIs can use many methods to save taxes

Non- Resident Indians (NRIs) are supposed to pay taxes on income earned in India during a particular financial year. So, any income that has been either accrued or received in India shall form part of the taxable income of NRI. If you have recently moved abroad, you may be worried about ensuring your tax compliance in India for the assessment year 2018-19. Moreover, you need to do tax saving in India with twofold goals- decrease tax liability and increase return on investments. While tax saving is essential, you should strive to invest prudently to reap the maximum benefit of the savings.

These simple tips will help NRIs in tax saving.

If you are an NRI and searching for investment options with tax saving benefits, you should realise that there are various options for the same. Take a look at these tax saving options for NRIs in A.Y. 2018-19:

Bank Deposits

For money to be parked for short-term or long-term investments, NRI can have any one of three following types of banks accounts:

  1. Non-Resident External Rupee Account (NRE): In this type of account, your funds in foreign currency are converted into Indian rupees and the rate prevailing at the time of conversion is applicable. The benefit here is-Interest earned on NRE account is exempt from tax for an individual who qualifies as a ‘person resident outside India’ under the exchange control law.
  2. Non-Resident Ordinary Rupee Account (NRO): Interest earned on NRO account (savings or fixed) is fully taxable. A deduction up to Rs 10,000 may be claimed for interest earned on savings account while filing the tax return.
  3. Foreign Currency Non-Resident Bank Deposit (FCNR): It is a term deposit or fixed deposit account, where NRIs can deposit their money in foreign currency. The deposits canbe made for a minimum maturity period of one year and maximum maturity period of 5 years. The interest earned under this account is tax-free, whereas the principal amount is taxed under wealth tax.

    Opening bank deposits can help save taxes. ecointersect.com

Other popular means of claiming a deduction from gross total income is via Section 80C.

Deductions Under Section 80C

Term Insurance

NRIs can invest in term insurance, a type of life cover, which provides financial coverage to the insured. If the insured expires during the tenure of the policy, then death benefit is payable to the nominee. A deduction of Rs 1.5 lakh is allowed for the premium paid towards term insurance plans as per Section 80C. This deduction can be claimed where the plan has been purchased in the NRI’s name or the name of his/her spouse. Moreover, purchasing online insurance plans like term plans has turned out to be simple, hence you can easily go for these online insurance plans and avail tax benefits on the premium payable.

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans offer duals benefits of life insurance and investment. Some part of the premium is utilised as insurance coverage to the policyholder, while the remaining amount is invested in various debt and equity schemes. As with all life insurance plans, the amount invested in a ULIP is available for tax deductions for NRIs.

Subject to certain conditions, the premium paid for ULIPs is allowed as a deduction under Section 80C of the Income Tax Act. ULIP premium can be deducted from your taxable income up to Rs 1.5 lakh, which is currently the permissible limit.

Loan to Buy a Home

Buying a house property is beneficial for you (NRI) as the interest income and principal income will allow for a tax rebate. The total deduction for interest payment on home advances is Rs 1.5 lakh, whereas the principal amount repayment on home loan already qualifies for a tax rebate of Rs 1 lakh.

Equity Linked Mutual Fund schemes (ELSS)

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Loaning a house can help save taxes for NRIs. Pixabay

For NRIs, ELSS also offers similar benefits under Section 80C of the Income Tax Act. ELSS are equity-linked mutual fund schemes investing in a diversified portfolio of Indian stocks. ELSS schemes can be purchased online, yet remember, there is an element of risk in ELSS as money is put into equity markets. Be that as it may, they are tax efficient instruments for NRIs.

National Pension Scheme (NPS)

You can subscribe to NPS if you have retained your Indian citizenship and planned to retire in India. You can contribute to NPS from NRE and NRO accounts. However, the pension needs to be received in India only and cannot be repatriated. Your investment up to 1.5 lakh can be used to avail tax deductions.

NPS comes under EET tax structure (Exempt-Exempt-Tax) and is a cost-effective, government-backed retirement savings plan. All the contributions and accrued capital gains are exempt from tax; however, withdrawal is subject to tax.

Also Read: Rich NRI Keralites Seek State-of-the-Art Old Age Homes to Ensure Stress-Free Life for their Aged Parents

Other Allowable Deductions:

Health Insurance- Deduction under Section 80D

NRIs can take health insurance from Indian companies for themselves or their family members and claim a deduction for the premium paid under Section 80D. Additionally, health plans like cancer insurance plans serve as monthly income plan with different payout options made available upon diagnosis of the disease. The availability monthly income plan feature offers a comprehensive financial coverage for the life assured as well as his family.

The deduction for health insurance is up to Rs25,000 for insurance of self. You can claim a deduction for insurance of parents up to Rs30,000 if their parents are a senior citizen (above 60 years) and Rs25,000 if the parents are below 60 years.

Education Loan- Deduction under Section 80E

Like resident Indians, NRIs can also take educational loans and claim tax deductions on the interest paid under section 80E. This loan might be either taken for higher education for self, spouse or children.

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Saving money by saving taxes now becomes easy for NRIS with these tips. Pixabay.

Besides, there is no limit on the amount which can be claimed as a deduction, and deduction is offered for a maximum of eight years or till the interest is paid, whichever is earlier.Additionally, no deduction is allowed on the principal repayment of the loan.

Conclusion:

As an NRI, you are qualified for tax exemptions on specific investments in India. Before investing, you should make an informed choice by understanding tax laws in India, in addition to the nation of your residence. Moreover, you must select tax saving instruments which would enable repatriation of income at maturity. Your investment decisions should consider your life objectives and also repatriation restrictions on investments in India.