Profile
Settings
Refer your friends
Sign out
Pradhan Mantri Garib Kalyan Yojana is the scheme introduced by the Government of India as a part of the Fiscal Budget 2016-17. The scheme was launched to curb black money leakage in India and control tax evasion. It is a tax amnesty scheme announced on December 16, 2016, for disclosing undisclosed income and assets between November 9, 2016, and December 30, 2016. However, several delays in releasing the final rules regarding this particular taxation regime led to its extension till March 31, 2017. In this article, we’ll learn about the Key Components of PMGKY, the Impact of PMGKY, Concerns, and Challenges in implementing PMGKY.
Key Component Of PMGKY
The main purpose of the PMGKY is to unearth black money and bring it into the formal system at a reasonable tax rate and penalty. The details are as follows:
A person can disclose his total income, which was not declared in any of the earlier assessment years or past years.
The undisclosed income should be admitted at a tax rate of 30% plus a surcharge called “Pradhan Mantri Garib Kalyan Cess” of 33% on such tax. Thus, the effective rate comes out to be 39% (the highest in history). This scheme applies to both residents and non-residents.
If 25% of that amount is deposited in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, interest would accrue on it at 4%, but no withdrawal will be allowed before completion of 4 years from the date of deposit.
This deposit has to be made within 1 month from the end of the declaration period, i.e., by April 30, 2017, for declarations filed before March 31, 2017. These are the Key Component of the PMGKY scheme.
The Impact of PMGKY
The tax on the disclosed income will be 50 per cent of the declared income. However, this is not all. An amount equal to 25 per cent of the total declared income would also have to be deposited for 4 years in zero-interest bearing deposit schemes or bonds.
Income Tax authorities are not allowed to initiate any inquiry or scrutiny that might reveal the declarant’s identity under this scheme except Section 50 of the Black Money Act, 2015. This section allows tax authorities to reopen cases that have already been decided if they have reason to believe that a person has not disclosed his foreign assets. This is a one-time facility, and no further declaration under the Income Declaration Scheme, 2016, can be made by any person after March 31, 2017.
The amount disclosed under PMGKY must be deposited in a non-interest-bearing deposit scheme called Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS). The amount disclosed under the scheme needs to be deposited in a non-interest-bearing deposit scheme called Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS). The interest rate on the deposits will be as notified by RBI from time to time. Interest will be paid at the end of the term of the deposit. The deposits can be made either in one instalment or in four equal instalments on or before March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017.
Concerns and Challenges in implementing PMGKY
The PMGKY scheme was introduced post the announcement made by Prime Minister Narendra Modi on November 8, 2016, about demonetising Rs 500 and Rs 1000 notes throughout the country. This is the main concern and challenge in implementing PMGKY. This decision was taken to control fake currency and black money. It would also curb tax evasion, which is the major cause of reducing income tax revenue. This scheme will enable citizens to declare their unaccounted cash (black money) and deposit it in banks or post offices, thus making it white money.
They will be charged with a 50% tax for this declaration and an additional 25% penalty for undisclosed money under Pradhan Mantri Garib Kalyan Yojana Scheme 2016-17.
The Union Cabinet approved the scheme on December 16, 2016. It came into effect on December 17 2016 and will remain in force till March 31, 2017. This scheme applies to all state government employees, including those who work for Central Public Sector Undertakings, autonomous bodies, local bodies, and statutory organisations other than those in receipt of pension and pensioners drawing monthly pension/family pension. The scheme also covers retired defence personnel (other than officers / JCOs / SNCOs) who draw their pensions through Defence Pension Disbursing Offices (DPDOs). In addition, pensioners under the National Pension System Trust are also covered.
Conclusion
If anyone is found to be making false declarations, then you are subject to a penalty of 10% of the undisclosed income. In addition, depending on the circumstances, you may be liable for punishment of 7 years rigorous imprisonment or 10 years rigorous imprisonment if you declare incorrect details of the undisclosed income. The Disclosure of black money under Pradhan Mantri Garib Kalyan Yojana (PMGKY) will benefit only those who have deposited cash between November 9 and December 30, 2016, in their bank accounts. The scheme is not applicable to deposits made before November 8 or after December 30, 2016.
