Global Economy

Budget 2019: New NRIs in focus as government goes after black money


MUMBAI: Black money continues to be a bee in the government’s bonnet. It will change the law to go after Indians who have settled abroad to get the NRI tag and escape tax on hidden income. And, in a quasi-amnesty scheme, individuals and companies who had declared cash hoards after Demonetisation, will get a second chance to come clean.

NRIs will be under glare for their undisclosed properties and bank accounts created during the years when they were ‘residents’.

The harsh Black Money Act — which can go back as early as 1961 and till now covered only ‘residents’— will be amended to include ‘non residents.’ The amendment will take effect retrospectively from 1 July 2015 when the law came into existence. Under the law, a person with hidden income or assets has to fork out 30% tax, 90% penalty, and even face prosecution.

“Suppose, a person has been residing in Dubai since 2004. If the government stumbles upon his undeclared Swiss bank accounts opened in 1999, what will matter is whether or not he was a resident in 1999. If indeed he was a resident then, he will face the music even if he’s currently an NRI. This widens the scope of the Act,” said senior chartered accountant Dilip Lakhani.

“The government can proceed to attach his foreign assets,” he said. However, according to Mitil Choksi, senior partner at Chokshi & Chokshi LLP, a person may still escape if, after becoming an NRI, he receives the asset as gift from an NRI friend who had originally acquired it.

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Under the ‘Income Declaration Scheme, 2016’, launched post DeMo, assessees were spared of prosecution as long as they were willing to surrender about 45% of the cash.

The government will now “notify the class of people” who didn’t pay tax, interest and penalty then, but will now get a chance to pay up.

“Such amnesty schemess should be extended to everyone eligible as many declarants could not pay tax, surcharge, penalty within due date,” said Amit Maheshwari, partner at Ashok Maheshwary & Associates.

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Tax and enforcement agency officials had a lurking suspicion that individuals were transfering funds as ‘gifts’ to NRI friends under RBI’s Liberalised Remittance Scheme (LRS) to reroute the money into India. The government will now tax NRIs receiving such gifts from residents who are not their relatives.

The amount will be considered as of NRI’s `deemed income’ which can be taxed in India. A resident can remit upto $250,000 a year under LRS.





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