The Pradhan Mantri Garib Kalyan Yojana (PMGKY) was introduced by Indian prime with Mr Narendra Modi in 2015. The main goal of this scheme is to addressing poverty. However, with the latest demonetization drive introduced by the large-scale government to procure the spread of black money, an amendment has been made to the current Income Tax Bill and the PMGKY is made a part of the Taxation Laws (Second Amendment) Act, 2016.
As per the recent amendment of the Income Tax Bill, people 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 at the rate of 33% under the set
25% of their undisclosed income will be used in the Pradhan Mantri Garib Kalyan Yojana scheme which will be refunded only after 4 years without accumulating any interest.
Therefore, the breakup of the deductions in this scheme would be:
- Percentage of Tax for undisclosed Income – 30%
- The penalty for undisclosed income – 10%
- A surcharge under PMGKY CESS – 33%
- Depositing amount under PMGKY – 25% of not disclosed income (returned as is after a period of 4 years)
- Interest accumulated during deposit – Nil
Under this new law, people can only declare their income which is there in the form of cash deposits in bank accounts of Indian banks. clarification of income in the form of stocks, deposits in overseas bank accounts, jewellery, immovable property, is not required.
If a person who has not disclosed his income PMGKY scheme, they will be charged a fine of 77.25% of their undisclosed income, if the same reflects in their tax returns. If the income does not show in a individuals tax returns, not only will they undergo prosecution but will also be liable to pay a further penalty of 10% additionally.
Points to keep in mind regarding the new amendment to the Tax Bill with regards to the Pradhan Mantri Garib Kalyan Yojana are:
- Disclosure of income under this scheme is voluntary.
- Whatever funds are collected under this scheme will be invested to make improvements in education, infrastructure, and healthcare which will be available to the underprivileged and poorer sections of society.
- Once the people have paid the required 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 chargeable amount, both of which combined to be 75% of the undisclosed money. Additionally, 10% of penalty is levied which brings the overall amount to. 85% of the undisclosed amount.
When an individual is giving a declaration under the PMGKY, they must furnish the sources/reasons for the undisclosed amount.
Following are the steps involved:
- Regarding the cash/deposits declaration – Declaration must be made according to the disclosed / undisclosed amount which an individual is holding. Deposits must be made in RBI or any other associated bank only.
- Payment of Taxes Before making the deposit – All the requisite penalties and taxes must be paid.
- Proof of payment and deposit to be given – Once the person has paid the required taxes, penalties and made the deposit, they must fulfil the formalities towards any other documentation that is required to complete the process.