CBDT black money report flags repeat penalties for non-disclosure of foreign assets

Under the current framework, each year’s income-tax return is treated as a fresh obligation.

A group of income-tax officials has presented a detailed report to the Central Board of Direct Taxes (CBDT), recommending changes to improve enforcement of the black money law, calling for rationalisation of penalties for non-disclosure of foreign assets and a focussed approach on “large evasions”.

A government official told Moneycontrol that the report emphasises the need for better case prioritisation, enhanced clarity on penalties, and rationalised procedures to avoid “repetitive penalisation” for the same omissions.

“Currently, if the same foreign asset is disclosed in one year but not in subsequent years, penalties are imposed annually for each year of non-disclosure. The internal report on Black Money Act explores some rationalisation on that,” the official said on condition of anonymity.

Under the current framework, each year’s income-tax return is treated as a fresh obligation. Failure to disclose a foreign asset in subsequent years can lead to penalties for every year of non-compliance.

This approach results in disproportionate punishment unless intentional concealment is proven. “Whether the same default can be penalised every year needs further clarity, the report has suggested,” the official said.

The report, which looked into the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, also highlights instances where taxpayers disclosed income or assets in their returns but failed to report them in the "schedule of foreign assets." This oversight attracts penalties.

“If a person has done disclosure in the return filing but not in the schedule, a penalty is imposed. The report suggests more clarity to the taxpayer on the issue,” the official said.

The report also underscores the need for a targeted approach in enforcement.

“Information on undisclosed assets is already there but it should be better filtered to focus more on red-flag cases. If there are too many cases on one official, focus is lost. The focus should be on large evasion and large assets,” the official said.

The report recommends a strategy to prioritise significant cases of evasion and assets of higher value, allowing for more efficient use of resources, he added.

Earlier this year, the disclosure threshold for foreign assets was raised from Rs 5 lakh to Rs 20 lakh to reduce the compliance burden on smaller taxpayers.