Recent Amendment by CBDT on Prosecution under the Black Money Act

The Central Board of Direct Taxes (CBDT) has issued an important amendment to its previous instruction dated March 15, 2022, regarding prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA, 2015). Previously, the Board clarified that prosecution under sections 49 and 50 of the BMA, 2015, would not be initiated in cases where penalties under sections 42 and 43 were not imposed or were imposable for small-value undisclosed foreign bank accounts, specifically those with balances not exceeding Rs 5 lakh. This relief was designed to protect individuals who may have unintentionally failed to disclose minor balances in overseas accounts.

With the introduction of the Finance (No. 2) Act, 2024, effective from October 1, 2024, the threshold for exemption under sections 42 and 43 has been revised. The new proviso indicates that penalty provisions will not apply to assets (other than immovable property) where the aggregate value does not exceed Rs 20 lakh at any point during the relevant financial year.

In light of this legislative change, the CBDT has amended its 2022 Instruction. It now specifies that prosecution under sections 49 and 50 of the BMA, 2015, will not be initiated in cases where penalties under sections 42 and 43 are not applicable in relation to assets (excluding immovable property) valued up to Rs 20 lakh. This amendment aligns prosecution relief with the newly revised penalty exemption, ensuring consistency in enforcement. The revised Instruction is effective from the date the Finance (No. 2) Act, 2024, enacted the amended provisions of sections 42 and 43.

Tax experts believe that this move will provide significant relief to individuals and entities with low-value foreign holdings, mitigating the risk of severe penal consequences for minor non-disclosures. Moreover, it signals the government’s intent to concentrate enforcement efforts on substantial cases of black money rather than minor or inadvertent omissions.

Official Copy of the Instruction

The Central Board of Direct Taxes (“Board”) had previously issued an Instruction, via F.No.285/46/2021/IT (Inv.V)/645 dated 15.03.2022, clarifying that prosecution under sections 49 and/or 50 of the BMA, 2015 shall not be initiated in cases where a penalty under sections 42 and/or 43 of the BMA, 2015 is not imposed or imposable concerning assets covered under the aforementioned provisions; that is, an asset, consisting of one or more bank accounts with an aggregate balance that does not exceed a value equivalent to Rs. 5 lakh during the previous year. This instruction aimed to protect individuals with foreign accounts containing minor balances that might not have been reported due to oversight or ignorance by ensuring that non-disclosure of such accounts would not result in penalty or prosecution.

The Finance (No. 2) Act, 2024 has substituted the proviso to sections 42 and 43 of the BMA, 2015, effective from 01.10.2024, making the current provision read as follows: “Provided that this section shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees.” This amendment broadens the scope of assets that are not subject to penalty provisions under section 42 and/or 43 of the BMA, 2015, while the existing Instruction continues to offer protection from prosecution proceedings only for assets encompassed by the unamended provisions.

The matter has been thoroughly examined within the Central Board of Direct Taxes (“Board”), and to provide relief from the initiation of prosecution proceedings under sections 49 and/or 50 of the BMA, 2015, in respect of assets covered under the provisions related to penalties under sections 42 and 43 of the BMA, 2015, it has been resolved to amend the Instruction dated 15.03.2022.

In view of the above and exercising powers under section 84 of the BMA, 2015, read with section 119 of the Income Tax Act, 1961, the Board hereby amends the Instruction dated 15.03.2022 and directs that prosecution proceedings under sections 49 and/or 50 of the BMA, 2015 shall not be initiated in cases where a penalty under sections 42 and/or 43 of the BMA, 2015 is not imposed or imposable concerning assets covered under the aforementioned provisions, i.e., an asset or assets (other than immovable property) where the aggregate value of such assets does not exceed a value equivalent to Rs 20 lakh during the relevant previous year.

This amendment will take effect from the date when the amendments to sections 42 and 43 of the BMA, 2015 became effective through the Finance (No. 2) Act, 2024.

For more information, refer to the official copy of the instruction attached here.