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Proposed Scheme of Declaration under Pradhan Mantri Garib Kalyan Yojana 2016 of undisclosed income stashed in Rs. 500 & Rs. 1000 currency notes -

After bold & surprising move of demonitisation of all old Rs. 500 and Rs. 1000 currency notes Government has proposed a total 50 % levy of tax, surcharge and penalty on the amount deposited after demonetisation and disclosed.The proposed window to black money holders gives them option to Declare under Pradhan Mantri Garib Kalyan Yojna 2016. The Scheme provides

  • Tax @ 30% plus 10 % cess (@33% cess (called as PMGK cess) of the amount of tax) plus penalty @ 10%. Total will be around 50% of the income declared.
  • Additionally 25 % of the declared income is mandatorily to be deposited in an anti poverty scheme with no interest and four years lock in period. The scheme is to be notified by government. The money from the Scheme is proposed tobe used for projects in irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood so that there is justice and equality.
  • So immediately 25% of the disclosed money will be available as declared clear income.
  • Additional 25% will be available as declared clear income after four years.

In case of nondisclosure of black money

Those who continue to hold their undisclosed cash and are caught will face tax @ 60% plus surcharge 15% (25% of the income Tax) which will be a total levy of 75% of the undisclosed income. Additionally the Assessing Officer may also charge penalty of 10%. A total of 85% tax & penalty may be faced in case of non disclosure.

TDS Master View:

In our opinion on declaration under the proposed Pradhan Mantri Garib Kalyan Yojna 2016 almost 60 % of the money declared will be available in hands with in four years. The break up will be; 25% immediately, 25% after four years and around 10% in the form of interest which one will get on investing the immediately received 25% clear income (which otherwise would have been stashed  in currency notes without any income theron).

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