Relaxation in Black Money Act: Key Changes and Implications
The Income Tax department has relaxed provisions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA). Individuals holding small-value foreign assets will now be exempt from penalties or prosecution under certain conditions, as delineated in the latest instructions issued by the Central Board of Direct Taxes (CBDT).
What Has Changed
CBDT has clarified that prosecution under Sections 49 and 50 of the BMA will not be initiated if a penalty under Sections 42 and 43 is not imposed. This relief is applicable to undisclosed foreign assets, excluding immovable property, as long as their combined value does not exceed Rs 20 lakh during a financial year.
This amendment arises from the Finance (No. 2) Act, 2024, which revised the exemption threshold from Rs 5 lakh to Rs 20 lakh.
Broader Coverage of Assets
The new threshold offers practical relief, particularly for professionals with global financial exposure. Niyati Shah, chartered accountant and vertical head – personal tax at 1 Finance, stated, “The increase from Rs 5 lakh to Rs 20 lakh offers substantial relief for taxpayers, especially salaried professionals, NRIs, and globally mobile individuals.”
The relief primarily encompasses financial assets such as foreign bank accounts, ESOPs, mutual funds, and pension holdings, while immovable property remains outside the scope.
Compliance and Misuse Concerns
The higher limit is also expected to alleviate compliance burdens. “This relaxation will significantly reduce compliance stress and avoid minor litigation for individuals with small, unintentional non-disclosures of foreign assets,” Shah noted. Concerns that the rule might be misused by splitting assets were addressed, as Shah emphasized that the Rs 20 lakh cap applies to the aggregate peak value of all assets. Thus, “asset-splitting is ineffective.” However, she added that deliberate concealment or structuring can still attract penalties and prosecution.
Policy Intent
Experts believe this adjustment reflects a pragmatic rather than lenient approach from the government. “This move signals a pragmatic shift by the government, focusing on material tax evasion rather than penalising taxpayers for small oversights,” said Shah. However, she stressed that this should not be misconstrued as an amnesty. “Reporting foreign assets in ITR remains mandatory, but small, inadvertent lapses get breathing room.”
Why It Matters
By elevating the threshold to Rs 20 lakh and broadening the coverage of assets, the government aims to reduce compliance anxiety and prevent unnecessary litigation. This shift keeps the focus on significant, deliberate violations concerning black money, thereby fostering a more balanced approach to taxation and compliance in India.
