Taxation of pm garib kalyan yojana 2016

10. Jan 2017

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Taxation of pm garib kalyan yojana 2016

  1. Taxation And Investment Regime For Pradhan Mantri Garib Kalyan Yojana, 2016 “Yet another chance to Come Clean” By: Direct Tax Vertical Asija & Associates LLP Chartered Accountants Asija & Associates LLP1
  2. Do or die for black money holders An opportunity to all the Black Money holders to come out clean by declaring their undisclosed income and paying heavy taxes and penalty. Asija & Associates LLP2
  3. Coverage 1. What is Pradhan Mantri Garib Kalyan Yojana, 2016? 2. Step wise process for making Declaration 3. Amount payable by declarant 4. Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 5. Time and manner of declaration 6. Operational Guidelines 7. The Insider View Asija & Associates LLP3
  4. Coverage 8. A Illustration 9. Declaration when void 10.Advantages of the Scheme 11.Disadvantages of the scheme 12.On whom does the sceme does not apply? 13.In comparison with IDS 14.A Comparative study with IDS. Asija & Associates LLP4
  5. 1-What is Pradhan Mantri Garib Kalyan Yojana, 2016? Any person may make (on or after the date of commencement of the Deposit Scheme but on or before a date to be notified by the Central Government in the Official Gazette), (Sec - 199C)  a declaration in respect of any income (in the form of cash/deposit in any bank/post office account)  chargeable to tax under the Income Tax Act  for the assessment year 2017-18 (or any earlier assessment year).  No deduction in respect of any expenditure or allowance or setoff of any loss shall be allowed against the income so declared. Asija & Associates LLP5
  6. 2 – Step wise Process for Making Declaration Payment of Tax, Surcharge and Penalty Deposition of 25 % of the disclosed income in the PM Garib Kalyan Deposit Scheme, 2016. File The Declaration Asija & Associates LLP6
  7. 3-Amount payable by declarant Tax @30% of income declared (Sec - 199D) Surcharge @33% of Tax (Pradhan Mantri Garib Kalyan Cess) Penalty @10% of income declared (Sec - 199E) Effective rate: @ 49.9% of undisclosed income payable to government. Asija & Associates LLP7
  8. 4-Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 1. The person making above declaration shall deposit at least 25 % of undisclosed income in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 (Sec - 199F). 2. The deposit shall bear no interest and the amount so deposited can be withdrawn only after 4 years from the date of deposit. 3. Further the depositor shall be required to fulfil such other conditions as may be specified in the said Deposit Scheme 2016. Asija & Associates LLP8
  9. 5-Time and manner of Declaration 1- Before submitting the above declaration, the declarant shall:- • Pay Tax, surcharge and penalty (i.e., 49.9 %). • Deposit at least 25% of the declared income in the deposit Scheme 2016. • The declaration shall be accompanied by proof of deposit of tax, surcharge and penalty 2-The declaration shall be made by a person competent to verify the return of income under Section 140 of the Income-tax Act, 3-The declaration shall made to the Principal Commissioner or the Commissioner, to be notified. 4-Declaration shall be in such form and verified in such manner, as may be prescribed. (Sec - 199G) Asija & Associates LLP9
  10. 6-Operational Guidelines Asija & Associates LLP10 Application forms for deposits under the Scheme (PMGKDS), will be received at Authorised Banks from 17th December, 2016 till 31st March, 2017. An application for the deposit shall be made in Form II indicating full name, address, PAN and Bank Account Details. It shall be accompanied by an amount (at least 25%) tendered in the form of cash, draft, cheque or electronic transfer. The acknowledgement receipt shall be provided by the bank. The Bank shall electronically furnish the details of deposit made in Form V to the Department of Revenue, the next day. The Department shall verify the information of deposit before accepting the declaration. The Bank shall maintain the confidentiality of the data received.
  11. 6-Operational Guidelines Asija & Associates LLP11 On receipt of the details at RBI, Bonds Ledger Accounts shall be created and the deposits made under the scheme shall be held at the credit of the declarant. A certificate of holding shall be issued to declarant in Form I. The holder can nominate one or more persons. No interest shall be payable on the deposits. The Authorised Bank shall upload the details of deposit into Reserve Bank of India’s Core Banking Solution ‘e-Kuber’ system. The Holding Certificates will be sent to the authorized banks through e-Kuber which may be issued to the customers. Authorised banks will provide necessary services with regards to deposit made by the declarant e.g. updating bank account details, cancellation of nomination, etc. Authorized Banks will be required to preserve applications until repayment is made.
  12. So do you think the effective pay out by the declarant is 49.9% ? NO Its not just 49.9% tax of undisclosed income The notional loss he suffers due to the  lock in period of 4 years due to deposit made under this scheme; and  The inflation rate Makes the effective rate equal to about 57%. Asija & Associates LLP12 7- The Insider View
  13. 8- An Illustration Under Pradhan Mantri Garib Kalyan Yojana 2016 Amount Undisclosed Income 10,00,000 Tax on Undisclosed Income (u/s 199D) (@ 30%) 3,00,000 Surcharge (@ 33% of tax) 99,000 Penalty (@ 10% of income declared) 1,00,000 Total Tax on above (@ 49.9%) 4,99,000 Deposit in Deposit Scheme (@ 25%) 2,50,000 Future Value of the Deposit account (Since, it is locked for 4 years & average inflation of 8 %) 1,79,100 Indirect Loss as on this day 70,900 or 7.1% Total loss( 49.9 % + 7.1 % ) 57 % Asija & Associates LLP13
  14. 9-Declaration when void Where a declaration has been made by:- Misrepresentation or suppression of facts or Without payment of tax and surcharge as specified u/s 199D or Without payment of Penalty as specified u/s 199E or Without depositing the amount in the Deposit Scheme as specified u/s 199F such declaration shall be void and shall be deemed never to have been made under this Scheme. Asija & Associates LLP14  Importantly, any tax and surcharge paid under this scheme shall not be refundable. (Sec-199K)
  15. 10-Advantages of the Scheme  The undisclosed income will not be included in total income of the declarant for any assessment year.  Nothing contained in any declaration shall be admissible in evidence against the declarant for the purpose of any proceeding under any Act (other than certain specified Acts as detailed in slide 18).  It would be the last chance to come clean for black money holders. Any detection of black money by AO thereafter (other than search cases) would attract 83.25% tax.  The declaration can be made for the current year as well as for any previous assessment years. Asija & Associates LLP15
  16. 11-Disadvantages of the Scheme  No deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed against the income in respect of which a declaration is made.[Sec - 199C (2)]  A declarant under this Scheme shall not be entitled, in respect of undisclosed income referred to in Section 199C or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957.  Any amount paid as Tax, surcharge or penalty, under this scheme shall not be refundable.  Declaration can be made only for Cash deposition and not for any other assets. Asija & Associates LLP16
  17. 11-Disadvantages of the Scheme  Immunity under Benami Transaction Act or other such law is not being provided.  No immunity against penalty and prosecution under the Income Tax or any other law is available.  No immunity against the tax and interest in case of other tax laws like service tax, sales tax, etc is available.  The provisions of Chapter XV of the Income Tax Act relating to liability in special cases and Section 119, Section 138 and Section 189 shall apply in relation to proceedings under this scheme. Asija & Associates LLP17
  18. The deposit scheme shall not be available to persons involved in or indicted in the specified manner in any illegal activity as covered under the following Acts:- 12-On whom does the scheme Does not apply? The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; Chapter IX or Chapter XVII of the Indian Penal Code; The Narcotic Drugs and Psychotropic Substances Act, 1985; The Unlawful Activities (Prevention) Act, 1967; The Prevention of Corruption Act, 1988; The Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money Laundering Act, 2002; Any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992; Asija & Associates LLP18
  19. 13-In comparison with IDS  The declaration can only be made with respect to cash deposits to the specified entity. However, in case of IDS, we can also declare other immovable and movable assets.  A person can make a declaration under the above scheme (PMGKY) in more than one capacity as against IDS in which he can make a declaration only in one capacity.  The critical dates with respect to payment of tax, surcharge and penalty and for making a declaration is not yet provided as against IDS in which definite timelines were defined. Asija & Associates LLP19
  20. 14- A Comparative Study with IDS Under IDS Under Pradhan Mantri garib Kalyan Yojna 2016 Undisclosed Income 10,00,000 Undisclosed Income 10,00,000 Tax on Undisclosed Income (u/s 199D) (@ 30%) 3,00,000 Surcharge (@ 33% of tax) 99,000 Penalty (@ 10% of income declared) 1,00,000 Tax on above (@ 45%) 4,50,000 Total Tax on above (@ 49.9%) 4,99,000 Deposit in Deposit Scheme (@ 25%) 2,50,000 Present Value of the Deposit account (Since, it is locked for 4 years & average inflation of 8 %) 1,79,100 Indirect Loss 70,900 or 7.1% Total loss( 49.9 % + 7.1 % ) 57 % Asija & Associates LLP20
  21. 14-Certain unplugged queries Will immunity be provided under other economic laws including Service Tax, VAT, Companies Act, SEBI Act, etc? If a person declares only a part of his undisclosed income, will he get the immunity under the scheme in respect of the income declared? Whether at the time of declaration, will the Commissioner make any enquiry in resect of such declaration ? Whether this scheme is open only to residents? Whether there is any time limit for the declarant to file the declaration under this scheme?........... Asija & Associates LLP21
  22. Asija & Associates LLP22 For a detailed discussion and professional advisory pertaining to the applicability and compliance of the said provision of law by your entity . Fix an Appointment with our Direct Tax Vertical Email @ CA Vasudha Jain Asso. Director ( CA Ashish Kapoor Partner In Charge ( Asija & Associates LLP Chartered Accountants Ph. no. : 0522- 4004652, 2205072
  23. • DISCLAIMER:-  This presentation has been prepared to provide a gist of the applicable law pertaining to Pradhan Mantri Garib Kalyan Yojana, 2016 for which Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha.  For detailed insight and for better understanding of the various provision of the said law, the said presentation should be read along with related provision of Income Tax Act, 1961 and Income Tax Rules,1962 and the Finance Act, 2016.  We shall not be responsible for any decision taken on the basis of the said presentation, without obtaining our professional guidance or consultation on the matter for which reliance was made on this presentation.” Asija & Associates LLP23 Thank You.