How to declare unaccounted money under the new Garib Kalyan Yojana and the watch-outs

Declaring unaccounted income under the new Pradhan Mantri Garib Kalyan Yojana will be a 3-step process going by what is mentioned in the Taxation Laws (second amendment) Bill 2016 . What's more, it's not applicable for money made from illegal activities and hiding facts may lead to loss of benefits and tax paid under the scheme. 

Steps to avail the Pradhan Mantri Garib Kalyan Yojana: 

i. Declaration can be about cash or deposits 

The declaration under the scheme can be made regarding unaccounted cash or deposits held with RBI, any bank (as defined in the scheme), head post office or sub post office or any other entity which may be notified for this purpose by the government. 

Obviously, a person with black money wanting to avail the scheme will not continue holding the money as cash because the demonetised notes are of no value unlessdeposited in a bank/post office. Consequently, the person will end up having to deposit the cash in a bank or post office and then avail the scheme for the deposit. 

ii. Pay taxes and make the deposit 

The person will have to pay 30% tax on income, 33% surcharge on tax, 10% penalty on income (as per the scheme rules) totalling to nearly 50% of the income to be declared under the scheme. The person would also have to comply with the other rules of the scheme such as depositing 25% of the amount to be declared, in the Pradhan Mantri Garib Kalyan Deposit Scheme 2016. This deposit would be without interest and be blocked for four years. 

iii. Make the declaration along with payment, deposit proof 

After depositing all the above at (ii) the person has to declare the income through a declaration to the Principal Commissioner or the Commissioner notified in the Official Gazette for this purpose. This declaration will have to be filed in a form and verified as prescribed by the government. 

The declaration of the income will have to be accompanied by the proof of deposit of the tax, surcharge and penalty as well as the interest-free deposit of 25% of income under the scheme. 

Further, the amount of undisclosed income declared under this scheme shall not be included in the total income of the declarant for any assessment year under the Income-Tax Act. This means that once a declaration is made under this scheme then this income cannot be called into question again subject to the other rules of this scheme. 

Watch Outs 

i. Scheme not available for income from illegal activities 

This scheme is not available to persons involved in or indicted in the specified manner in any illegal activity as covered under the following Acts: 

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974; 

Chapter IX or Chapter XVII of the Indian Penal Code; 

The Narcotic Drugs and Psychotropic Substances Act, 1985; 

The Unlawful Activities (Prevention) Act, 1967; 

The Prevention of Corruption Act, 1988; 

The Prohibition of Benami Property Transactions Act, 1988 and the Prevention of Money-Laundering Act, 2002; 

Any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992; 

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 

ii. If facts are hidden then benefit of scheme & tax paid are lost 

If the declaration is made by misrepresenting or suppressing facts then not only will the declaration be void but the tax etc paid will also not be refunded. As per the amendment bill, if the declaration is made by misrepresenting or suppressing facts or without paying tax, surcharge, penalty or without depositing the amount in the Deposit Scheme as per rules, such declaration shall be void and shall be deemed never to have been made under the Garib Kalyan Scheme. Importantly, any tax and surcharge paid under this scheme shall not be refundable. 

iii. Other proceeding regarding income disclosed will end 

Once certain income has been declared under this scheme then the declarant will not be allowed to continue or file any appeals regarding any other assessments regarding the same income. Also, the person cannot claim any tax-related set offs or reliefs in relation to this income.