Tax, penalty to be levied at market price under black money law

Undisclosed overseas assets such as immovable property, jewellery, shares and art works will be valued at fair market price for the purpose of tax and penalty under the new black money law.

Besides, the value of an overseas bank account will be the sum of all deposits made in the account since its opening, the Tax Department said o Friday while announcing rules for the new law that has come into force with effect from July 1.

In case of current fair market value of assets being below the acquisition cost, the Tax Department will consider the original purchase value for computation of tax and penalties.

According to the rules notified by the Central Board of Direct Taxes (CBDT), persons having undisclosed assets abroad will have to declare them in a prescribed format in rupee terms during the 90-day compliance window ending September 30 by paying 60 per cent tax and penalty.

They will have time till December 31 to pay the levies. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, provides for a total of tax and penalty of 120 per cent on the income or assets held abroad after the expiry of the window.

The rules stated that foreign income and assets would be valued for calculation of tax and penalty both for the compliance period and beyond its expiry.

The fair market value of an immovable property will be higher from the acquisition cost or the price that the property shall fetch in open market on the date of valuation.

The same principle would also be applicable for valuing bullion, jewellery, precious stone, drawings, paintings, archaeological collections, and sculptures or work of art.

For shares and securities, the fair market value will be the higher of the cost of acquisition or average of the lowest and highest price on the date of valuation.

Along with the rules, the CBDT has appended seven forms including those which have to be filled by persons while declaring the overseas undisclosed assets.

The holders of the assets will have to disclose details of the assets with regard to its location, fair market value and date of acquisition.

With regard to jewellery, the rules said disclosures have to be made about the purity, quantum and value of gold, diamond and other precious metals.

Further, the Reserve Bank's reference rate on the date of valuation should be used for converting the value of foreign assets and income into Indian rupee.

Where the fair market value of an asset is determined in a currency other than one of the permitted currencies designated by RBI, they should be converted into US dollars on the date of valuation as per the rate specified by the central bank of that country. Thereafter, the value in dollar would be converted into rupee.

The rules also provide for the format of notices to be send to the persons holding undisclosed assets. Also the format for appeals to Commissioner (Appeals) and Appellate Tribunal have been provided.

The rules also provided a formula for calculating the fair market value of an unquoted equity shares and provided a methodology for calculating the interest of a person in a partnership firm, association of persons or Limited Liability Partnership (LLP).

The rules also said in case the person disclosing foreign income does not have a PAN, he or she would be required to apply for it. It also has a provision for filing of revised declaration by a person disclosing assets under the window.

According to the rules, the person has to pay the tax due within 15 days of the receipt of notice of payment by Tax Recovery Officer.