CREATION OF SPECIAL UNIT FOR PROBE INTO UNDISCLOSED FOREIGN ASSETS BY CBDT

In recent times, multiple instances of tax evasions linked to foreign incomes as well as foreign assets have been reported. This has led to the current major step taken by the Central Board of Direct Taxes (CBDT) which frames new rules for the Income –Tax Department. 

It has formed a special unit of investigation for probing into cases of tax evasions in cases of undisclosed incomes & assets held by Indian residents abroad and keeping a close watch on such Indian residents and the black money held by them in foreign offshore accounts. The task shall be undertaken by the Foreign Asset Investigation Units (FAIUs), which have been notified in all the 14 investigation directorates of the tax department situated in different regions of the country, who till now were predominantly engaged in undertaking tax raids and seizures and furthering the advancement of intelligence procedures to scrutinize tax evasions and offenses committed through various means, for whose creation a total of 69 existing posts were diverted from their normal workings towards the special operation the Central Board of Direct Taxes (CBDT) in November last year, after receiving the assent from the Union Finance Minister Nirmala Sitharaman.

 As result, various fresh treaties & negotiations with various nations, some of which have even been re-negotiated have made it considerably easier for the facilitation and exchange of tax information. Similarly, more & more of such nations are interested in entering such agreements and are at the same time, are following the international protocols set by the Organisation for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF)  for ensuring tax transparency and battling offenses like global money laundering, terror financing, and tax evasion. Currently, the Income-Tax Department is in possession of the enormous data being received from various domestic as well as coming in f international sources for enquiring possibilities of illegal foreign assets held by an individual which required a special unit for undertaking & analyzing this information for further use.
Such Foreign Asset Investigation Units(FAIUs) will work separately but in concurrence of the Income-Tax Department and will operate under the jurisdiction of an officer ranked as and above Director General(DG) of Income-Tax (Investigation) officer and their work will be monitored directly by the Central Board of Direct Investigation.

What information will be under close watch by the Special Unit of IT?

a.    Now, institutions like Banks, mutual funds, insurance, and pension and stock-broking firms will be required to submit details related to their Indian client to the US Deptt. Which will be shared with New Delhi on an automatic basis.

b.    Similarly, Indian entities will undergo a similar procedure by sharing such information to the US Deptt to ensure transparency in the tax information.

c. At the present, some of the treaties that have been entered between nations or which provide for the exchange of tax information exchange protocols include the Double Taxation Avoidance Agreement (DTAA), Tax Information Exchange Agreements (TIEAs), and the latest one being the Foreign Account Tax Compliance Act (FATCA) entered between India & the United States of America. 

d.    The FATCA involves spontaneous sharing of info on banking information as well as of financial products such as equities, mutual funds, and insurance, etc., and is intended to combat offenses such as black money hidden out of India.

e.    The Income Tax Return (ITR) forms shall also be used to gather such information. From now on, it will also have a separate column asking for information of Indian residents holding any foreign assets, which will later be matched with the information received through the automatic exchange from the global parallels. 

f.    Any discrepancy will be subject to committed examination with the specially trained & equipped IT unit specialized to undertake and perform their functions.

Conclusion

Such a step by the CBDT could be seen as another major initiative towards encouraging transparency in tax procedures on a wholesome level. Further, it will necessarily curb malpractices going on a global level like money laundering, terror financing, and tax-evasion practices and will ensure better corporate governance in our country.

Author:

eStartIndia Team