People availing cut rates of taxes on their incomes are barred from showing their earnings as undisclosed to get those legalized, according to a latest clarification from the revenue board.
"Those taxpayers would not be entitled to enjoy the opportunity of whitening the hitherto-earned undisclosed money," it says.
The existing opportunity on voluntary disclosure of income will not be applicable for the incomes coming from the sectors that are enjoying tax-cut benefit, the clarification mentioned.
The National Board of Revenue (NBR) directives on the income-tax provision came after the field-level taxmen had detected an increased propensity among a section of taxpayers-both institutional and individual-to show their previous undeclared incomes as income from the sectors enjoying reduced tax benefit.
Taxmen smelt a motive of evasion of substantial volumes of tax by adopting the strategy.
On top of the unethical practice, the NBR income-tax wing issued the instructions last week to all of the income-tax offices across the country asking the taxmen not to allow black money-whitening facility for the incomes from the sectors under reduced tax rates.
However, those taxpayers can show their incomes in the regular tax returns of the current year.
A number of taxpayers have taken advantage of the provision of voluntary declaration on undisclosed income and the lower rate of tax on income from fish farms, which had been effective until September last, officials said.
The Section 19E of the law, framed for voluntary disclosure of undisclosed income in FY 2012-13, allows taxpayers to show their undisclosed money with 10 per cent tax in addition to normal tax rate. Taxmen aren't to ask any question on the income shown thereof.
However, there were no clear instructions for showing the income under low-tax benefit as undisclosed one and avail the money-whitening facility.
In the clarification, the NBR made it clear that none will be allowed to show their incomes earned from the reduced tax rates as undisclosed ones.
However, income from capital gains and winning lottery would be allowed to be legalised after paying tax and penalty at the applicable rates under voluntary disclosure provision, the clarification said.
Normally, a 15 per cent income tax is applicable on income from capital gains and 20 per cent on income from winning lottery.
Tax officials said several tax returns had been submitted in the current fiscal year (FY) 2014-15 with declaration of a considerable amount of income earned in the previous years as fish-farm income to enjoy the reduced rate.
Until FY 2013-14, owners of fish farms had enjoyed a reduced rate of tax at 3.0 per cent.
They now have to pay 35 per cent corporate tax on incomes from fish farms in case of a company.
For fish farms in individuals' name, the owners have to pay 10 per cent to maximum 30 per cent tax on their incomes from the pisciculture.
Taxpayers can enjoy lower tax rate by showing undisclosed incomes from those sectors than any income from other sources.
The provision left a lacuna through which many of the self-proclaimed fish-farm owners disappeared earlier after enjoying the reduced tax rates. There was no existence of such farms found.
They said it is clear that they showed incomes from false fish farms after earning the money from other businesses.
Following the trend, some tax officials expressed their concern over the trickery as they can neither ask any question nor can they reject the claim as per tax law.
The official said, "Normal rates of taxes are relatively high on other incomes which they intentionally are avoiding by showing undisclosed income from fish farms."
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