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India to extend Black Money Act 2015 to cover non-residents retrospectively

Thursday, 11 July, 2019

India's 2019 federal budget retrospectively extends the Black Money Act 2015 (BMA) to non-resident persons who were Indian-resident when the undisclosed foreign income or foreign asset was earned or acquired, if this was after 1 July 2015.

Currently, the BMA, formally the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015, applies only to taxpayers who are ordinarily resident in India. The 2019 Finance Bill now proposes to extend its applicability to a person who may currently be a non-resident or not ordinarily resident in India, but who was Indian-resident in the year in which the undisclosed foreign income or foreign asset was earned or acquired.

This retrospective amendment may pose legal issues and repercussions for individuals who have attained the status of non-resident, says law firm Khaitan, especially as it will take retrospective effect from 1 July 2015 (the date of entry into force of BMA).

The BMA is also to be amended to grant additional powers to appellate tax authorities. Currently, the Commissioner of Income Tax (Appeals) can only confirm or cancel penalties levied under the BMA. In future, the Commissioners will also be able to increase or reduce penalties.

The 2019 Finance Bill also extends the mechanism for mutual assistance in recovering tax debts from countries with which India has an agreement. Currently, this mechanism depends on the India Tax Authority knowing of the existence of a taxpayer's assets in the country whose assistance is sought. From September 2019, this will be extended to cover situations where the location of assets owned by a person is unknown, but his tax residency is known.

The budget also deems that any asset gifted by a resident to a non-resident is taxable in the hands of the recipient, for transfers made on or after 5 July 2019.

The provisions of the Bill will not become law until they have been approved by both houses of parliament and received the assent of the President of India. Once approved, the provisions will apply for the 2019-2020 Indian fiscal year (1 April 2019 to 31 March 2020) or whatever other date is specified.