New Delhi: Finance Minister Nirmala Sitharaman’s Union Budget Friday sought to bring non-resident Indians (NRIs) under the ambit of the foreign black money Act, and that too with retrospective effect.
The move comes as the Modi government looks to target NRIs who may have escaped the ambit of the stringent law enacted in May 2015 during the regime’s first term as part of its efforts to fulfil the poll promise of going after tax evaders.
At present, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 covers only assessees who are Indian residents. Now, the government wants to expand the definition of assessees to include NRIs.
There have been instances where names of NRIs have come up as part of tax data leaks but the government had no powers to initiate prosecution proceedings against them. NRIs are not required to pay taxes or file their tax returns.
The amendments proposed to the Act target individuals who were Indian residents while acquiring their undisclosed property overseas and earning unaccounted income, but then moved out of the country to become non-residents.
Also read: Why all funds deposited by Indians in Swiss banks are not black money
Retrospective nature of law
A memorandum, explaining the changes to be brought to various tax related laws, was presented as part of the Budget documents Friday.
It said this particular move intends to clarify the legislative intent behind enacting the black money Act, “which was to tax such foreign income and assets, which were not charged to tax under the Income-tax Act”.
It further elaborated that the term “assessee” shall mean a person being a resident in India or a person being a non-resident but who was a resident in India in the year before he or she acquired this undisclosed income or the undisclosed asset located outside India.
“These amendments will take effect retrospectively from 1st July, 2015,” the memorandum said.
Though the Modi government had promised to not amend tax laws retrospectively after it came to power in 2014, this move may be justified by them as an anti-evasion measure.
‘Will be challenged’
Amit Maheshwari, managing partner at Ashok Maheshwary and Associates LLP, said, “This will impact several individuals who may have left the country in the hope of avoiding the draconian black money Act. If they were residents in the years where the undisclosed asset was acquired or undisclosed income was earned, they will get covered under this Act.”
“Interestingly, this coverage is retrospective and we expect this to be challenged in the courts,” added Maheshwari.
Under the stringent provisions of the Act, non-filing of tax returns or filing of tax returns with inadequate disclosure of foreign assets is liable for prosecution, with rigorous imprisonment of up to seven years.
A fine of Rs 10 lakh is also applicable.
Also read: Black money of Indians stashed abroad is in range of $216bn and $490bn, govt reports
High net worth Indians emigrating are not a vote of confidence in the future of the economy. Avoiding tax liabilities for past transgressions may be a very small part of their decision making process. Retrospective amendments to the law is another contribution of the babus to making India a difficult place to operate in.