Tuesday, 20 December 2016

How much it cost to convert black into white?



  
     
    How much it cost to convert black into white?
How much I have to pay to government to convert my undisclosed money (Black money) into white money?


Features of the Scheme states as under :

·         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.

·         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.

·         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.

·         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.


Analysis of tax Amount to be paid
As Disclosed in the schema 

Tax @30% of the undisclosed income, surcharge @33% of tax and penalty @10% of such income is payable

Effective Tax rate 

Tax
        30.00
Surcharge
          9.90
Penalty
        10.00
Total (Effective tax rate)
        49.90

However person opts the schema has to mandatory deposit 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.

The above phrase contains the hidden cost,

Let us explain by an example

Suppose I have 100 Rs black money which I am disclosing under the schema which will lead me to deposit Rs. 49.9 in the government account
In addition I have to deposit 25 % of my undisclosed income under the in Pradhan Mantri Garib Kalyan Deposit Scheme 2016; same are interest free and have a lock-in period of four years. That means I have to deposit Rs. 25 under this schema on which I will not able to generate any income for four years.
Value of my 25 Rs after four year will decline and lead’s to addition cost to me and addition revenue to government of Rs. 7.92 ( Click here to know how )

That means schema will cost me Rs 57.82 for my 100 Rs disclosure.

So considering the financial impact, it must say effective tax rate for the declarant is 57.82 percent.


For Non-Declarant

For 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.



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