A bill to deal with black money stashed abroad was passed by Parliament on Wednesday, with the government warning those having such assets to utilise the 'compliance window' or have sleepless nights once the global automatic information exchange system comes into effect in 2017.
Finance minister Arun Jaitley said in Rajya Sabha that the new law, with stringent provisions, will help "squeeze" black money even as he underlined that the option of 'compliance window', which may run for a few months, was not an amnesty scheme.
"The world is no longer willing to tolerate tax havens which thrive in secrecy," he said, just before the 'Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015' was approved by the House, two days after the Lok Sabha passed it.
Jaitley, however, made it clear that the new law will not cover those having amounts equivalent to Rs 5 lakh in bank accounts abroad, which may belong to students or those working there.
The compliance window will provide an opportunity to people to come clean by declaring overseas assets and paying tax and penalty totalling 60%, Jaitley said while replying to a debate on the bill on the last day of the session.
The timeframe for the compliance window will be notified as part of the rules.
"It is a taxation which is being imposed on an asset or an income outside. Since the tax has been imposed for the first time, we are giving you a compliance period where you pay 30+30% and then you can sleep well.
"And then also remember, if you don't use this compliance window now, time will run out because by 2017 there will be a realtime automatic disclosure of information taking place," he said.
The bill, which seeks to unearth unaccounted funds and assets stashed by Indians abroad and provide for 120% tax and penalty in addition to 10-year jail term, will become law after getting assent of the President.
The government has also armed itself to attach domestic property of equivalent value of such offenders.
Stressing that the new black money law was not "an amnesty scheme", Jaitley said it does not provide for waiver of tax. Instead it proposes tax, penalty and also prosecution.
Moreover, he said, "amnesty schemes also have a protection against naming and shaming... your identity will be kept secret. There is no such protection which has been granted."
The compliance window will give an opportunity for payment of tax and penalty, he said, adding "once the compliance window closes, you are going to be taxed very heavily."
Tax and penalty of 120%, which will be imposed after the expiry of 'compliance window', means the "value of assets is gone," the Finance Minister said.
Responding to apprehensions expressed by some members about harassement of innocent persons by taxmen, Jaitley said, it will apply only to resident and will not cover prosessionals and Non-Resident Indians (NRIs) working abroad.
"Are innocents going to be harassed as a result of this? The answer is no," Jaitley said, adding "those who work abroad are not going to be covered. It is those who are resident taxpayers and assesses in India, and who keep unauthorised income outside are going to be liable under this Act."
He underlined that the black money law will deal with foreign assets and not the domestic tax evasion which was being taken care of by the Income Tax Act.
"If it is violation of keeping national assets outside the country...we have made it now a predicate offence, which is liable for an action under Prevention of Money Laundering Act (PMLA) and lead to attachment of equal amounts of (domestic) assets," he said.