India allows offshore amnesty before introducing severe penalties

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The federal government in India has scheduled a bill to tax undisclosed foreign income and assets of citizens at 30%, with fines & prison sentences for disobedience.
The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill charges any so called dirty money including investments in any foreign entity of 30%. The Bill takes such assets out of the scope of the ordinary Income Tax Act 1961, so that no deductions or relief for losses are permitted.

Penalties for non-disclosure range to up to three times the tax due – i.e. 90% of the undisclosed income or value of the asset, as well as the flat rate. Non-wilful failure to file an accurate declaration of foreign income will attract a fine of 1 million rupees (almost €15,000).

Wilful non-filers risk jail sentences of up to seven years, while deliberate evasion may be punished with sentences of up to ten years’ imprisonment, as well as fines. The penalties apply to the beneficial and legal owners of undeclared foreign assets, as well as to beneficiaries of trusts. However, the Bill does not precisely define the disclosure duties of beneficiaries of foreign discretionary trusts.

The Bill is expected to come into effect in April next year, applying to the fiscal year 2015 onwards. A transitory opening offering amnesty from prosecution is to be opened beforehand, thought the dates for this will be announced at a later stage. The Bill also amends the Prevention of Money Laundering Act 2002 to include tax evasion as a money laundering offence.