Having notified a new law to deal with cases of overseas illegal assets in 2015, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, the Modi government is now looking to give it more teeth and aggressively take on tax evaders. On Friday, in her maiden Budget speech, Finance Minister Nirmala Sitharaman proposed to change the definition of the term assessee retrospectively from July 1, 2015, "so that it may be clarified that the residential status of the assessee, in the previous year in which the income is earned or the asset is acquired, shall be the determinative factor for charging under the said Act".
In other words, 'assessee' would be redefined to include a non-resident or resident but not ordinarily resident, who was residing in India in the year before an undisclosed asset was acquired. Tax authorities would soon start targeting individuals who had acquired such assets when they were residents in India but have since become non-residents.
The move comes amid reports of many high-net-worth individuals (HNWIs) moving out of India and changing their residency status. Research released by Morgan Stanley Investment Management last March showed that nearly 23,000 dollar millionaires had migrated out from India since Prime Minister Narendra Modi stormed into power in 2014. Nearly 5,000 more of them - or 2 per cent of the total Indian HNWIs - left the country in 2018, according to the Global Wealth Migration Review (GWMR) 2019 by AfrAsia Bank and research firm New World Wealth.
However, this is not the first time that the taxman is putting the spotlight on foreign assets. Last October, too, CBDT chairman Sushil Chandra disclosed that the Income Tax Department is investigating cases involving foreign bank deposits and purchase of properties overseas by "thousands of Indians" as part of a major crackdown to unearth black money under the new legislation. The Act has provisions for a steep 120 per cent tax and penalty on undisclosed foreign assets and income, along with a jail term of up to 10 years. Moreover, it covers the direct owner of an asset as well as a beneficial owner.
India is now receiving information on assets held overseas by Indians under various global treaties, making it easier for authorities to nab tax evaders. It's worth mentioning here that stricter disclosure of foreign earnings by taxpayers is among the many tax-related proposals in Budget 2018, which will become effective when you file your ITR this year. "Reporting of assets held abroad has been made more robust and detailed compared to previous years. It now includes additional disclosure of custodial accounts, foreign depository accounts and foreign debt and equity interest," said Homi Mistry, Partner, Deloitte India.
Edited by Sushmita Choudhury Agarwal