November 28, 2016

Demonetisation Tax Penalty- Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)

After the withdrawal of currencies of Rs.500 and Rs.1,000 Government of India proposed the changes in penalty clauses calling it as Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY).

These changes were done after there is a huge concern by many who holding black money that penalty will be higher or they have to suffer a lot. In the backdrop of this, Government came up and proposed these tax amendments.

Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

The Government of India announced this special scheme on 16th December, 2016. This will come into force from 17th December, 2016 to till 31st March, 2017.

Who can deposit in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016?

The deposit under this Scheme will be made by any person who intends to declare undisclosed income under sub-section (1) of section 199C of the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016.

The deposits will be held at the credit of the declarant in Bonds Ledger Account maintained with Reserve Bank of India.

A certificate of holding the deposit shall be issued to declarant in Form I.

How to deposit in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016?

The deposits will be accepted at all the authorised banks notified by Government of India. The deposits will be made in multiples of rupees one hundred.

The deposit under sub-section (1) of section 199F by a declarant will not be less than 25% of the undisclosed income to be declared under sub-section (1) of section 199C of the Act.

The entire deposit to be made under sub-section (1) of section 199F under this Scheme will be made, in a single payment, before filing declaration under sub-section (1) of section 199C.

The deposit will be made in the form of cash or draft or cheque or by electronic transfer and shall be drawn in favour of the authorised bank accepting such deposit.

What is the effective date of Pradhan Mantri Garib Kalyan Deposit Scheme, 2016?

The effective date of opening of the Bonds Ledger Account will be the date of tender of cash or the date of realisation of draft or cheque or transfer through electronic transfer.

Application of Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

An application for the deposit under this Scheme will be made in Form II clearly indicating the amount, full name, Permanent Account Number, Bank Account details (for receiving redemption proceeds), and address of the declarant: Provided that if the declarant does not hold a PAN, he shall apply for a PAN and provide the details of such PAN application along with acknowledgement number.

Nomination under Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

# A sole holder or a sole surviving holder of a Bonds Ledger Account, being an individual, may nominate in Form III, one or more persons who shall be entitled to the Bonds Ledger Account and the payment thereon in the event of his death.

# Where any amount is payable to two or more nominees and either or any of them dies before such payment becomes due, the title to the Bonds Ledger Account shall vest in the surviving nominee or nominees and the amount being due thereon shall be paid accordingly. In the event of the nominee or nominees predeceasing the holder, the holder may make a fresh nomination.

# A nomination made by a holder of Bonds Ledger Account may be varied by a fresh nomination or may be cancelled by giving notice in writing to the Authorised Bank in Form IV.

# Every nomination and every cancellation or variation shall be registered at the Reserve Bank of India through the authorised bank and shall be effective from the date of such registration.

# If the nominee is a minor, the holder of Bonds Ledger Account may appoint any person to receive the Bonds Ledger Account or the amount due in the event of his death.

The transferability of the Bonds Ledger Account shall be limited to nominee or to the legal heir of an individual holder, in the event of his death.

Interest rate on Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

This scheme will not offer any interest on your deposit.

Term of Pradhan Mantri Garib Kalyan Deposit Scheme, 2016

The Bonds Ledger Account will be repayable on the expiration of 4 years from the date of deposit and redemption of such Bonds Ledger Account before its maturity date will not be allowed.

Declare the undisclosed wealth under Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)

If you declare the undisclosed wealth under Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY), then you have to pay  tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge, and penalty (totaling to approximately 50%).

Along with the above-said tax, penalty, and cess, the declarant will have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilized for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality. This is a FREE deposit scheme of four years.

If you hold undisclosed wealth and not declare it

If you hold undisclosed wealth and caught by IT department, then flat 60% tax plus a surcharge of 25% of tax (15%), which will amount a levy of 75%. Besides, if the assessing officer decides he can charge a 10% penalty in addition to the 75% tax.

Therefore it mounts to be more than 75% of the wealth which you have to pay on any such undisclosed wealth. Also, do remember that no expense, deductions, set-off is allowed.

The same is explained in below image.

Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY)

Do note that this Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha as “Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY). It is yet to be passed and then will be considered as act. Hence, let us wait what will happen.

Refer our latest post related to demonetization-

13 Comments

  1. Hi sir,
    I’m from Belgaum Karnataka
    I sold my agricultural land for 2000000 rupees. but now they telling me that they give me 1200000 cash. and register it for only 800000.
    how can i manage 1200000 unaccountable money?

    Reply
      • dear sir,
        can i cancel this deal? or
        you please tell me what can i do?

        Reply
        • Jayakumar-I am not saying that you cancel the deal. But make sure that whatever the deal, it must be under the purview of the legality of the land.

          Reply
          • Thank you sir…..

            Reply
  2. I wonder as to what led Government to introduce this scheme!!!

    I think the pace at which old notes are being deposited in bank accounts, Government must be getting worried about success of demonetization move. Since, if amount deposited nears or equals demonetized currency, it would mean that either people have converted their black money into white by using loopholes in laws or there is no black money at all in the economy (which is impossible. We have seen how government officials / politicians shamelessly demand bribe even for trivial work. We have seen how our neighborhood shopkeeper never issues proper invoice but a “proforma invoice” so as to resort under-invoicing.)

    Also, the number of Income tax officials in our country is not sufficient to scrutinize veracity of returns filed (forget about search and seizure operations). Also, due to the lethargy in department, Government might have thought fit to introduce this scheme.

    However, Government may get some success if this entire exercise results in widening tax base in future.

    Let us hope for the best.

    Reply
  3. Basavaraj Tonagatti Sir,

    Please respond to my query it’s very important to me. I am in depression almost.

    I did a ‘over 2-year’ certification in hardware, networking, ccna, rhct etc. and for past 6 years, I have been working as fixing network problems, repairing computers & other such things ( I was self-employed ).
    During these days, I accumulated +2.5. I never used to keep my money in saving a/c. Now, what is the way for me. Under what ‘head’ should I disclose my income ? My concern is ‘will tax authorities believe that money was earned in hard way and got accumulated over a period of time ?

    Reply
    • Sourabh-You have to show this under the head of business income. I am not sure of what amount you are holding and how you managed those. Hence, hard for me to guide.

      Reply
  4. Hi Basav
    Just a month ago someone had sold a property ,without showing the exact amount …he just kept his bulk amount in bank savings account with the intention of buying a new one within a short period ….now he is in real trap of IT after all those chaoas happened these days …..so my query is what he can do in this situation ?

    Reply
    • Sir, I am gujarati Boy and I am a CMA professional and my girlfriend from Bihar Last month we got married this girl on 25/11/2016 as per gujarat marriage act without inform her parents and i got marriage certificate also from gujarat panchayat marriage registrar from Village . she gone at her home after marriage . Now she want come without informed to her parent . Whether we need to inform her parent if yes How ? whether they can go police station file for case , I am worry about case due to I don’t want any case because it will impact on my career and JOB . Can i bring her at Gujarat and then inform her parent by phone or notice ? that we got married. any time period for valid marriage certificate .

      Please advise by email

      Reply

Submit a Comment

Your email address will not be published. Required fields are marked *

five + fifteen =

Share This