Untaxed money can be kept in banks by paying only 10% tax
The government has offered new avenues to whiten black money with provisions that no authorities, including the income tax department, question the source of the funds.
The proposed budget for FY 2020-21 gives the green signal to the investment of untaxed money in the stock market and as well allows undisclosed incomes to be kept as bank deposits.
“…With a view to providing impetus to the stock market, a major hub of economic activity of the country, individual taxpayers can invest money in the capital market between Jul 1, 2020, and Jun 30, 2021, and show it in their tax returns by paying tax at a rate of 10% on the value of the investment, subject to satisfying certain conditions including a lock-in period of three years, and no authority including the income tax authority will raise any question in this regard,” Finance Minister AHM Mustafa Kamal said in his budget speech on Thursday.
The finance minister proposed two incentives to the Income Tax Ordinance that would allow individuals to legalise undisclosed income and property.
“Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities between Jul 1, 2020, and Jun 30, 2021, on paying taxes at a rate of 10% on the value of the said declaration; and no authority including the income tax authority can raise any question on such declarations.”
“… Regardless of the provisions of any other prevailing law of the land, individual taxpayers will be allowed to disclose any type of undisclosed house property including land, building, flat, and apartment between Jul 1, 2020, and Jun 30, 2021, on paying tax at a particular rate on per square meter of the said asset.”
Describing the incentives as an opportunity for taxpayers to “amend mistakes” made due to “lack of adequate knowledge on tax return submission”, Kamal also proposed a new provision to the Income Tax Ordinance to curb money laundering and tax dodging through under or over-invoicing and false investment declarations.
“According to the proposed provision, 50% tax will be levied on the proven amount of over- or under-invoicing, or on the proven amount of false declaration of investment,” he said in the budget speech before adding that he hoped it would be "highly effective".