India has committed to adopting automatic exchange of information under the OECD Common Reporting Standard (CRS). Soon dozens of jurisdictions will begin to collect information and exchange it with other countries, including India on an automatic basis under the CSR, and, by as early as 2017, India may have the information it needs to investigate taxpayers with accounts or structures in these jurisdictions.
Taxpayers are being given a window of opportunity to come clean before information is shared. The Black Money (Undisclosed Income and Foreign Assets) Imposition of New Tax Bill came into effect on 1 April 2015 and on 1 July 2015 it was announced that for a limited time period (until 30 September 2015) Indian residents have an opportunity to declare any offshore income and assets voluntarily on a more favourable basis than would otherwise apply.
The Bill applies to Indian tax residents with undisclosed foreign income and assets. For those who voluntarily come forward, tax will apply at a flat rate of 30% together with a penalty of 30%.
It is expected that taxpayers will recognise this shift towards greater tax transparency and take advantage of this limited window of opportunity. Those who do not come clean can expect tough consequences and the Bill includes enhanced penalties for failing to disclose foreign income and assets and failing to submit a tax return in relation to foreign income and assets. These include penalties of up to 90% of the tax due (as well as tax at 30%) and possible prosecution and imprisonment of up to 10 years.
This may be the only opportunity taxpayers have to come forward before the Government comes to them.