PMGKY Scheme for Declaration of Undisclosed Income/ Unaccounted Cash notified by Govt.

Govt. Notifies PMGKY Scheme 2016 for Declaration of Undisclosed Income/ Unaccounted Cash

Govt. has notified the PMGKY Scheme 2016 which is open from 17 Dec. 2016 to 31 Mar. 2017 for Declaration of undisclosed Income/ unaccounted cash in line with the provisions of the ‘Taxation Laws (Second Amendment) Act, 2016’, which has come into force on 15 Dec. 2016.

GOI Notification (MLJ) dt. 15 Dec. 2016 ‘Taxation Laws (Second Amendment) Act, 2016

PMGKY shall commence on 17 Dec. 2016 and shall remain open for declarations up to 31 March, 2017. Also CBDT has notified PMGKY Scheme Rules 2016 and PMGK Deposit Scheme Rules 2016.

Non declaration of undisclosed cash or deposit in accounts under the Scheme will render such undisclosed income liable to tax, surcharge and cess totaling to 77.25% of such income, if declared in the return of income. In case the same is not shown in the return of income a further penalty @10% of tax shall also be levied followed by prosecution. It may be noted that the provisions for levy of penalty for misreporting of income @200% of tax payable under section 270A of the Income-tax Act have not been amended and shall continue to apply with respect to cases falling under the said section.

The Taxation Laws (Second Amendment) Act, 2016 has also amended the penalty provisions in respect of search and seizure cases. The existing slab for penalty of 10%, 20% & 60% of income levied under section 271AAB has been rationalised to 30% of income, if the income is admitted and taxes are paid. Otherwise a penalty @60% of income shall be levied.

Highlights of the Amendments under Income Tax for PMGKY

The salient features/ highlights of the PMGKY Scheme are as under:

(i) Declaration under the Scheme can be made by any person in respect of undisclosed income in the form of cash or deposits in an account with bank or post office or specified entity.

(ii) Tax @30% of the undisclosed income, surcharge @33% of tax and penalty @10% of such income is payable besides mandatory deposit of 25% of the undisclosed income in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. The deposits are interest free and have a lock-in period of four years.

(iii) The income declared under the Scheme shall not be included in the total income of the declarant under the Income-tax Act for any assessment year.

(iv) The declarations made under the Scheme shall not be admissible as evidence under any Act (eg. Central Excise Act, Wealth-tax Act, Companies Act etc.). However, no immunity will be available under Criminal Acts mentioned in section 199-O of the Scheme.

Further comparative information on the PMGKY in tabular form is as under:

PARTICULARSEXISTING PROVISIONSAMENDED PROVISIONS
General provision for penaltyPENALTY (Section 270A)

Under-reporting – @50% of tax

Misreporting – @200% of tax

(Under-reporting/ Misreporting income is normally difference between returned income and assessed income)

No changes proposed
Provisions for taxation & penalty of unexplained credit, investment, cash and other assetsTAX  (Section 115BBE)

Flat rate of tax @30% + surcharge + cess (No expense, deductions, set-off is allowed)

TAX  (Section 115BBE)

Flat rate of tax @60% + surcharge @25% of tax (i.e. 15% of such income). So total incidence of tax is 75% approx. (No expense, deductions, set-off is allowed)

PENALTY (Section 271AAC)

If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax (including surcharge) of 75%.

Penalty for search  seizure casesPenalty (271AAB)

(i) 10% of income, if admitted, returned and taxes are paid

(ii) 20% of income, if not admitted but returned and taxes are paid

(iii) 60% of income in any other case

Penalty (271AAB)

(i) 30% of income, if admitted, returned and taxes are paid

(ii) 60% of income in any other case

Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)New Taxation and InvestmentRegimeUndisclosed income in the form of cash & bank deposit can be declared:

(A) Tax, Surcharge, Penalty payable

Tax @30% of income declared;

Surcharge @33% of tax;

Penalty @10% of income declared

Total @50% of income (approx.)

(B)  Deposit

25% of declared income to be deposited in interest free Deposit Scheme for four years.

Related Notifications/ Press Release on PMGKY

i) Press Release of CBDT on PMGKY 2016

CBDT Press Release dt. 16 Dec. 2016

ii) PMGK Deposit Scheme 2016 notified

PMGK Deposit Scheme 2016 notified by Govt.

iii) CBDT Notifies 17 Dec. 2016 as opening date and 31 March 2017 as closing date for PMGKY

PMGKY Scheme: Opening and Closing Dates notified by CBDT

iv) CBDT Notifies ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana (PMGKY) Rules, 2016’

PMGKY Rules 2016 notified by CBDT

v) Jurisdiction over PMGKY Scheme Notified

CBDT Notifies Jurisdiction over PMGKY Scheme (Manual/ Electronic Declarations)

vi) Govt. proposes to launch PMGKY Scheme 2016

GOI’s Income Tax Amendment Bill on PMGKY dt. 26 Nov. 2016