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But in case of non compliance, the penalty would be raised to 60 per cent, in addition to the tax required to be paid. [Representational Image]Reuters file photo

Finance Minister Arun Jaitley on Monday introduced a bill– Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha, whereby a tax of 60 per cent will be levied on a declarant's undisclosed income or investment or cash credit deposited in the banks.

The government has also introduced an income disclosure scheme called the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016. Under the scheme, people are allowed to deposit money in their accounts till April 1, 2017, by paying 50 per cent of the total amount -- 30 per cent as tax, 10 per cent as penalty and 33 per cent of the taxed amount as Garib Kalyan Cess that will be used for undertaking activities for the welfare of the poor.

Twenty five percent of the amount will be locked down in interest-free Pradhan Mantri Garib Kalyan Deposit Scheme. Employing the use of carrot and stick approach, the amount voluntarily declared under the new scheme (PMGKY) will not be included in the total income of the declarant for any assessment year. No set off is allowed under any head on this amount.

However if tax sleuths discover any undeclared income during income tax searches, the individual will be charged an additional penalty of 30 per cent apart from the regular tax on the money, provided that the individual being assessed admits to the undisclosed income and "substantiates" the manner in which the undisclosed income was derived. But in the case of any non-compliance, the penalty would be raised to 60 per cent, in addition to the tax required to be paid.

Stating the need to introduce the amendment to existing legislation, a press release said that "concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money.

"There have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into white again, the government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean," Arun Jaitley, the finance minister was quoted saying on the subject, according to IANS.