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Tax Panel Suggests Easing Norms To Reveal Undisclosed Income

The panel suggested that a voluntary disclosure shouldn’t invite penalty.



A customer handsover India rupee banknotes at a cash counter (Photographer: Dhiraj Singh/Bloomberg)
A customer handsover India rupee banknotes at a cash counter (Photographer: Dhiraj Singh/Bloomberg)

The taskforce set up to review direct tax laws suggested that taxpayers should be allowed to reveal undisclosed income for the last six years, according to a person aware of the development.

The panel suggested that a voluntary disclosure shouldn’t invite penalty but a taxpayer would be required to pay some amount as additional tax, the official said on the condition of anonymity as the report is not public yet. This can be done for six years as against one year now, he said.

The tax department will not put such a taxpayer under scrutiny and also won’t reopen books of previous years, according to the official. That will, however, only apply for voluntary disclosures, and not for cases detected by tax department, he said.

In cases where the income tax department finds concealed income, the current provisions of penalty and prosecution will continue.

According to prevailing rules, a past return can be revised only up to the end of an assessment year. For instance, a return for financial year ended March 31, 2019 can be revised up to March 31, 2020, explained Sunil Agarwal, partner at AZB & Partners. Fear of penalty and criminal prosecution deters taxpayers from revising older returns, Agarwal said.

The official quoted earlier said the proposed move will help businesses reveal undisclosed income and show more income in their books.

This is an opportunity to disclose black money and bring it into the business cycle, Neha Malhotra, executive director at Nangia Advisors (Andserson Global), told BloombergQuint. It will help businesses show better growth, and come clean without the threat of getting caught, she said, adding that the move can widen the base of the formal economy. But she cautioned that businesses disclosing a higher income in an earlier year run the risk of scrutiny if the amount falls in subsequent years.