Impact of Union Budget 2024 on Oversight of Foreign Assets and Tax Compliance
The Union Budget for 2024 has introduced new regulations to strengthen the oversight of foreign assets and ensure tax compliance for individuals domiciled in India who are leaving the country. As of October 1, 2024, these individuals will be required to procure a clearance certificate under the Black Money Act. This certificate will attest that the individual has no outstanding tax liabilities or has made satisfactory arrangements to settle such dues before departing India, marking a significant shift in the country’s approach to undisclosed foreign assets.
Notably, the amendments in the Black Money Act aim to offer relief to taxpayers from penalties in cases where they fail to disclose overseas assets worth ₹20 lakh, according to Central Board of Direct Taxes (CBDT) Chairman Ravi Agarwal. This represents a notable change from the current regulations, where taxpayers face a ₹10 lakh penalty for failing to disclose a foreign asset worth as little as ₹5 lakh.
Under the existing regulations, individuals domiciled in India are already required to obtain a certificate from tax authorities confirming that they have no unresolved tax obligations under Section 230 of the Income-tax (I-T) Act. However, the new budgetary measures introduce an additional layer of scrutiny by mandating a clearance certificate specifically under the Black Money Act for those leaving India, aligning with updated requirements for disclosing foreign assets and income in Income Tax Returns (ITRs) starting October 1, 2024.
The revised regulations necessitate that individuals domiciled in India leaving the country must obtain a tax clearance certificate and disclose all foreign assets, including investments like shares and securities, as well as any income generated from these assets when filing their ITRs. This also means that the ‘Black Money Act’ will now be a determining factor in whether a resident requires a tax clearance certificate before leaving India, as highlighted by Tax Partner Amit Maheshwari of AKM Global. Furthermore, Partner Aarti Raote of Deloitte India emphasized that a tax clearance certificate is required for individuals repatriating from India for employment or settling overseas permanently.
It’s important to note that the new regulations do not affect foreign residents visiting India for tourism, but they are essential for expatriates who have worked in India temporarily, as they must also obtain clearance for no dues under the Black Money Act.