The Black Money Promise and the 2015 Law
When Narendra Modi became the Prime Minister of India in 2014, one of his most powerful promises was to bring back the black money hidden abroad.
To fulfill this goal, the government introduced a strict law in 2015 — officially called the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
This law was meant to:
Detect and penalize undisclosed foreign income and assets held by Indian residents abroad.
AdvertisementDeter cross-border tax evasion and illegal money transfers.
Reinforce India’s commitment to bringing back unaccounted wealth stashed in foreign accounts.
However, after 10 years of implementation, the Act has faced increasing criticism for being too harsh, overlapping with other tax laws, and unfair in certain genuine cases.
Now, in 2025, the Government of India has decided to review the Act and make it more practical and balanced.
Why is the Black Money Act Being Reviewed Now?
The government has set up a panel of experts to review the law and suggest improvements. The main objectives of this review are to identify and fix:
Overlaps or inconsistencies between the Black Money Act and the Income Tax Act, 1961.
Legal and procedural challenges that emerged due to large volumes of foreign financial data under FATCA and CRS (global tax information sharing frameworks).
Harsh clauses such as excessively high penalties, retrospective tax assessments, and automatic criminal prosecution — even in minor or unintentional cases.
Composition of the Review Panel
The committee is led by a senior officer of the Income Tax Department and includes representatives from:
Central Board of Direct Taxes (CBDT)
Ministry of Finance (Department of Revenue)
Legal experts specializing in tax law
Enforcement agencies handling cross-border financial intelligence
Current Issues & Problematic Provisions
1. Separate Taxation Regime
The Black Money Act operates independently of the Income Tax Act.
Once an income or asset is taxed under one law, it cannot be taxed again under the other.
However, in practice, both Acts sometimes apply to the same case — creating confusion and fear of double taxation or double punishment.
Example:
If a person fails to disclose a foreign bank account, it might be taxed once under the Income Tax Act for non-disclosure of income, and again under the Black Money Act for owning an undisclosed foreign asset.
Tax and Penalty Structure (as per the 2015 Act)
| Nature | Rate / Penalty | Effect |
|---|---|---|
| Tax on undisclosed foreign income/assets | 30% (flat) | No exemptions or deductions allowed |
| Penalty for non-disclosure or misreporting | 90% of the asset/income value | Very high financial burden |
| Penalty for non-filing of return | ₹10 lakh | Even for small assets |
| Criminal prosecution | 3 to 10 years imprisonment | Non-bailable and automatic |
These penalties are mandatory, not discretionary — meaning even small or unintentional mistakes can lead to severe punishment.
Criminal Prosecution Provisions
The Act classifies most violations as criminal offences, not civil defaults.
Even minor non-disclosures can attract imprisonment of up to 10 years.
Willful evasion can result in non-bailable warrants and blacklisting.
Experts argue that this rigid structure discourages voluntary compliance because people fear criminal action even for unintentional errors.
Rigidity and Lack of Flexibility
Unlike the Income Tax Act, the Black Money Act provides:
No deductions or exemptions
No settlement mechanism
No officer discretion to reduce penalty or consider intent
As a result, many genuine taxpayers — such as those with inherited or small foreign assets — face unnecessary litigation and harassment.
Why “Harsh Clauses” Are Being Revisited
The government now acknowledges that while the Act succeeded as a deterrent, it may have discouraged voluntary disclosure and created legal overlaps.
Reasons Behind the Review:
Excessive penalties discourage self-reporting.
Overlap with Income Tax Act causes double taxation and confusion.
High Court judgments have criticized the Act’s lack of procedural fairness.
Global tax environment has evolved — India now automatically receives data through CRS, reducing the need for fear-based deterrence.
Expected Reforms Under Review
| Issue | Proposed Change |
|---|---|
| Penalty Rationalization | Reduce multiplier (e.g., from 3× tax to 1–2×); introduce cap on total penalty. |
| Decriminalization | Convert minor offences (like filing delays or clerical errors) into civil penalties. |
| Assessment Rules | Link taxation to the year of acquisition, not year of discovery. |
| Voluntary Disclosure Scheme | Introduce a one-time amnesty or settlement scheme for genuine taxpayers. |
| Coordination with Income Tax Act | Define clear jurisdiction boundaries to prevent overlap. |
| Procedural Safeguards | Require pre-prosecution notice, allow appeal before trial, ensure natural justice. |
Benefits of the Proposed Review
Encourages voluntary compliance — taxpayers are more likely to disclose if laws are fair.
Reduces litigation burden by clarifying overlaps with the Income Tax Act.
Boosts investor confidence by signaling a predictable and rational tax regime.
Improves administrative efficiency — freeing tax authorities to focus on major offenders.
Aligns India’s laws with international best practices seen in the U.S. and U.K.
India’s Fight Against Black Money
The Black Money Act (2015) was part of a three-step anti-corruption reform strategy launched by the Modi government:
Black Money Act (2015): To target undisclosed foreign assets.
Benami Transactions (Prohibition) Amendment Act (2016): To control domestic unaccounted property.
Demonetization (2016): To eliminate illicit cash in circulation.
India also signed key international frameworks such as:
Foreign Account Tax Compliance Act (FATCA) with the United States.
OECD’s Common Reporting Standard (CRS) for automatic exchange of global financial data.
Now, the government’s approach is shifting from punishment to compliance, reflecting maturity and modernization in India’s tax administration system.
