Foreign banks turn cautious due to black money law


The overseas banks are hit by the new stringent black money law in India. Hence, these banks are asking hard questions to people as well as entities from India who are looking forward to open accounts. The reason is along with those who possess black or unaccounted assets the ones who helped them get away with the money will also face strict action as per the law. This law is effective from earlier this year.

The government led by the Prime Minister Narendra Modi is in hunt for black money. Even the other countries have signed the global agreements as well as tax treaties. The agreements also include the provisions for the cooperation on evasion. This has persuaded several overseas banks to reach the local experts to examine the prospective customers.

Considering the minimized global lenience for evasion, the banks and financial institutions are to face a closer scrutiny. This scrutiny is related to customers’ tax residential grade, legal as well as beneficial ownership of the accounts and use of power of attorney.

The intermediaries ask for income tax returns, the sources of the funds and other relevant information to make sure the foreign transactions are clear. This was revealed by a banker with knowledge about the development.

Due to the new law, there are concerns amongst the intermediaries including banks as well as consultants. Especially this law does not offer detailed guidelines on what will be considered abetment and the precautions that are necessary for the intermediaries.

The Central Board of Direct Taxes will shortly issue comprehensive guidelines on what are considered abetment and the appropriate action that will be executed. As per the Undisclosed Foreign Income and Assets Act 2015, the criminal and civil liabilities will be imposed on anyone who helps a person to declare wrong tax. The punishment will be rigorous with imprisonment for six months to almost seven years. The same will apply to banks and the financial institutions that aid the concealment of income and assets of the resident Indians from foreign. Under this law, the act of hiding wealth in other countries is a criminal offence and the person will be subjected to a maximum of ten years of imprisonment.


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