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The Pradhan Mantri Garib Kalyan Yojana (PMGKY) was originally launched by Mr. Narendra Modi in 2015 as a scheme built with the objective of addressing poverty. However, with the recent demonetization drive launched by the government to curb the spread of black money, an amendment has been made to the existing Income Tax Bill and the PMGKY has been made a part of the Taxation Laws (Second Amendment) Act, 2016.
As per the revised amendment of the Income Tax Bill, individuals who are declaring their undisclosed income (black money), they will be required to pay a penalty of 10%, tax at the rate of 30%, CESS under the PMGKY at the rate of 33%. Additionally, 25% of their undisclosed income will be invested in the Pradhan Mantri Garib Kalyan Yojana scheme which will be refunded only after 4 years without accumulating any interest. Hence, the breakup of the deductions in this case would be:
- Percentage of Tax for undisclosed Income - 30%
- Penalty for undisclosed income - 10%
- Surcharge under PMGKY CESS - 33%
- Amount to be deposited under PMGKY - 25% of undisclosed income (returned as is after a period of 4 years)
- Interest accumulated during deposit - Nil
Under this new amendment, people can only declare their income which is lying in the form of bank and cash deposits in bank accounts of Indian banks. Declaration of income that is in the form of stocks, deposits in overseas bank accounts, jewellery, immovable property, etc. is not allowed. If a person who has undisclosed income lying with them but have not disclosed it under the PMGKY scheme, they will have to bear a fine of 77.25% of their undisclosed income, if the same reflects in their tax returns. If the income does not reflect in a person’s n tax returns, not only will they undergo prosecution but will also be liable to pay a further penalty of 10% additionally.
Some of the points to keep in mind regarding the amendment to the Tax Bill with regards to the Pradhan Mantri Garib Kalyan Yjana are:
- Disclosure of income under this scheme is voluntary.
- Whatever funds are collected under this scheme will be used to make improvements in education, infrastructure, and healthcare that is available to the underprivileged and poorer sections of society.
- Once the individuals have paid the requisite taxes and penalty n their undisclosed income, they will be given the rights to their fund in the future.
- In case an individual does not disclose funds under the PMGKY scheme, the penalties and taxes which they would be required to pay would be significantly higher. The percentage of tax payable will be 60%, 25% towards the surcharge amount, both of which combine to be 75% of the undisclosed amount. Additionally, 10% of penalty is imposed which brings the overall amount to a85% of the undisclosed income.
When a person is making a declaration under the PMGKY, they must furnish the sources / reasons for the undisclosed amount. Following are the steps involved:
- Declaration regarding the cash / deposits - Declaration must be made according to the disclosed / undisclosed amount which an individual is holding. Deposits must b made in RBI or any other associated bank only.
- Payment of Taxes Before making the deposit - All the aforementioned penalties and taxes must be paid.
- Proof of payment and deposit to be furnished - Once the person has paid the required taxes, penalties and made the deposit, they must fulfill the formalities towards any other documentation that is required to complete the process.
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