Tax Dept. Focus on Undisclosed Assets Overseas

Special Unit of IT Dept. to Focus on Undisclosed Assets Overseas

• The government has established a specialized unit of the Income-tax Department to facilitate it to commence a focused inquiry on Indians keeping unreported moveable and immovable assets overseas.
• Foreign Asset Investigation Units have recently been established in all 14 tax department investigation directorates located in different parts of the country, primarily tasked with carrying out raids and seizures and developing intelligence to control tax evasion by different methods.
• In November of last year, the central board of direct taxes (CBDT) authorized a total of 69 current posts in the tax department for the establishment of such units, approved by the Ministry of Finance. Income Tax Department’s policy is framed by CBDT.
• “The Foreign Asset Investigation Units were established to concentrate on unreported asset and black money holding overseas by Indians.
• In this context, India now gets detailed information through various new various treaties and some re-negotiated in the past few years,” another officer said. “
• We are now in a global environment where tax information automatically transfers are the norm.
• He said more and more countries and jurisdictions follow international protocols on global money laundering, terror funding, and tax avoidance set up by the Organization for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF)
• The tax officer now has huge data from various international and local sources to investigate suspected illegal foreign assets owned by an individual.
• Therefore, a department devoted to the analysis of this information was required and this mountain of information was screened, the official said.
• New units would also investigate leaks such as Panama papers in the case of Indian entities named in global tax papers.
• Including the Double Tax Avoidance Agreement (DTAA), the Tax Exchange Agreements (TIEAs), and the most recent Foreign Account Tax Enforcement Act (FATCA) between India and the USA, among other major treaties and protocols for automatic tax information exchange through which Indian tax authorities receive information.
• FATCA allows for the automatic sharing and battle against the danger of black hidden money abroad, including bank accounts and financial items such as equities, recipient funds, and insurance.
• Mutual funds, insurance, bank pension, and stock-broking companies will report information of their Indian customers to the United States, which will be shared with New Delhi.
• Similarly, Indian organizations would exchange shared data about Americans.
• The FAIUs would be under the authority of the income tax (investigation) rank officer’s jurisdictional director general and its function will be directly supervised by the CBDT, the officials said.
• Income Tax Return (ITR) forms often have a separate sheet requesting details of an individual or entity’s foreign assets and these are obviously matched with the data collected from global counterparts via automatic exchange.
• Any mismatch needs dedicated analysis and the new unit will do that job very well.

Key Point to concentrate on black money undisclosed assets  abroad

• Foreign Asset Investigation Units were established in 14 investigation directorates of the Income-tax department.
• They were set up to concentrate on instances of undisclosed assets held by Indians abroad and black money stored away abroad.
• In November 2020, with the approval of the Finance Ministry for the establishment of such units, 69 positions in the tax department were ‘redirected’
• FAIUs have been set up in all fourteen investigation directorates of the Income Tax Dept located in different parts of India, which are mainly accountable for raids and seizures, and for developing intelligence to control tax evasion by various mechanisms.
• Generation of black money and its trying to stab abroad in tax havens and offshore financial centers have dominated public debate and debate.
• Parliament members, the Supreme Court, and the general public have expressed unmistakably their concern about this issue, especially after some reports have suggested estimates of such unrecognized wealth held abroad.
• FAIUs will be under the authority of the competent director general of income tax (investigation) and will be directly monitored by the CBDT.

HIGHLIGHT ON BLACK MONEY BILL

WHAT ARE THE SALIENT FEATURES OF THE BLACK MONEY BILL?

Black Money (Undisclosed Foreign Income and Assets) And Imposition of Tax Bill, 2015, popularly known as Black Money Bill passed by both the Houses of Parliament, requires all Indians to declare undisclosed foreign assets and income.

This bill will be effective from 01.04.2016. It is expected that the compliance window could be open for 2-3 months to declare undisclosed income and assets. A further six months could be provided to make tax payments.

Salient features of the Black Money Bill:-

• Income Tax on all undisclosed foreign income will have to be paid at the flat rate of 30 percent without any exemption, deduction, set-off, or carry forward losses that the Income Tax Act permits.
• Tax on all undisclosed foreign income will have to be paid at the flat rate of 30 percent without any exemption, deduction, set-off, or carry forward losses that the Income Tax Act permits.
• Enhanced punishment of jail for 3-10 years for willful evasion of tax on foreign income along with a penalty equal to three times the amount of tax evaded or 90 percent of the undisclosed income or the value of the asset.
• There is a limited compliance window offer. Offenders would have to pay tax at the rate of 30 percent but the concessional penalty would be equal to the tax amount. I.e. 30%.
• Failure to file returns of foreign income or assets will attract a penalty of Rs. 10 lakh.
• The new law will not cover those having amounts equivalent to Rs 5 lakhs in bank accounts abroad, which may belong to students or those working there.
• Compliance window will give an opportunity for payment of tax and penalty, “once the compliance window closes, people are going to be taxed very heavily.
• Tax and penalty of 120 percent (30% TAX and 90% PENALTY), which will be imposed after the expiry of the ‘compliance window’, means the value of assets is gone.
• Black Money Bill will apply only to residents and will not cover Non-Resident Indians (NRIs) working abroad. Those who work abroad are not going to be covered.
• It is those who are resident taxpayers and assessed in India, and who keep unauthorized income outside are going to be liable under this Act.
• The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

CBDT’s August 18, 2025 internal instruction under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

Key Highlights of the CBDT’s Instruction : 

• No Prosecution if No Penalty : The instruction clarifies that prosecution proceedings u/s 49 and 50 of the Black Money Act will not be initiated in cases where a penalty u/s 42 and 43 is not imposed or is not imposable. This instruction extends relief to taxpayers who may have inadvertently failed to disclose small-value foreign assets (other than immovable property), by protecting them from both penalties and criminal proceedings under the Black Money Act.
• Threshold for Relief – INR 20 Lakh : This applies where the value of undisclosed foreign assets (excluding immovable property) does not exceed INR 20 lakh in aggregate at any point in the relevant year.
• Practical Meaning : If a taxpayer fails to disclose such foreign assets up to INR 20 lakh in case No penalty will be levied under Sections 42/43, and No prosecution will be launched under Sections 49/50. (CBDT Instruction (F. No. 285/46/2021-IT(Inv.V)/88 dated 18.08.2025)).

What This Means in Practice under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

• This is an internal CBDT instruction, not a statutory amendment. The provisions under Sections 49/50 continue to exist in law; the instruction simply directs that in these small-value cases, the Income Tax Department will not pursue prosecution. CBDT’s August 18, 2025 internal instruction is not in the public domain. Independently verified its authenticity through internal sources. The information shared publicly is faithful to the original circular without alteration. The CBDT’s internal instruction clarifies that both financial penalties (Sections 42/43) and criminal prosecution (Sections 49/50) are off the table for undeclared foreign assets (excluding property) up to ₹20 lakh.

• This ensures that inadvertent omissions in disclosure (like overlooked bank accounts or investments abroad) won’t attract punitive or criminal consequences.

• However, it’s crucial to remember this is an internal CBDT instruction, not a legislative amendment. The criminal provisions under Sections 49/50 still remain intact in the law, and this instruction merely dis-incentivizes initiating prosecution in such low-value cases.

Summary Table on Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015