Taxation Laws: Why they are a positive stroke for the nation

Further to the announcement of demonetization by way of withdrawal of bank notes of Rs. 500 and Rs. 1000 denomination, the government has taken a step forward to curb black money. Concerns were raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney master your money IThe Winning Leap SME Special
Moneycontrol

Home » News » Economy

Nov 30, 2016, 09.14 PM | Source: Moneycontrol.com

Taxation Laws: Why they are a positive stroke for the nation

Further to the announcement of demonetization by way of withdrawal of bank notes of Rs. 500 and Rs. 1000 denomination, the government has taken a step forward to curb black money. Concerns were raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money.

Like this story, share it with millions of investors on M3

Taxation Laws: Why they are a positive stroke for the nation

Further to the announcement of demonetization by way of withdrawal of bank notes of Rs. 500 and Rs. 1000 denomination, the government has taken a step forward to curb black money. Concerns were raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money.

Post Your Comments

Share Cancel

| 1 Comments

Girish Vanvari (more)

Co-Head Tax, KPMG |

Further to the announcement of demonetisation by way of withdrawal of bank notes of Rs 500 and Rs 1000 denomination, the government has taken a step forward to curb black money. Concerns were raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. Therefore, the government has introduced the Taxation Laws (Second Amendment) Bill, 2016 (the Bill) in the Parliament to amend the provisions of the Act and the Finance Act to ensure that defaulting taxpayers are subjected to tax at a higher rate and stringent penalty provision.

Further, there have been 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 economy. Accordingly, the Pradhan Mantri Garib Kalyan Yojana 2016 (PMGKY) scheme has been introduced in the Bill.

The government has proposed an amendment in the Act as well as in the Finance Act with respect to undisclosed income which will suffer a tax of 60 percent plus a surcharge of 25 percent of tax (i.e. 15 percent). So the total incidence of tax would be 75 percent. However, if the tax officer determines the income, penalty may be levied at the rate 10 percent of the tax payable in addition to such tax. The taxpayer is not allowed to claim any expense, deductions or set-off. These amendments are progressive in nature and put to rest the uncertainty on the penalties on the amounts deposited in the bank account post the announcement of demonetization. 

A new voluntary disclosure scheme (PMGKY) has been introduced for the benefit of the poor, pursuant to which past years’ undeclared income can be offered to tax at the rate of 30 percent plus surcharge of 33 percent plus penalty of 10 percent making it effective (approximate) rate of 50 percent. Further, 25 percent of such income will need to be deposited in a specified deposit scheme for 4 years interest-free. This will give one more chance to the taxpayer to come clean and declare the right income. 

These amendments appear to be very strategic, and if everything goes well, tax collections will go up substantially, further money will be raised in specified bonds for country’s investments needs. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality. Further, the taxpayer would also retain 25 percent of his undisclosed income to himself for future use. 

All in all, the chase against black money, relentlessly continues.   

(Girish Vanvari, Partner and Head of Tax, KPMG in India)

Buy, Hold, Sell ? Hear it first on M3
Taxation Laws: Why they are a positive stroke for the nation

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login