In today’s world where everyone wants to earn lot of money, they go to many lengths to find out a way to save taxes. This non- co-operation with the Government in respect to tax related transactions has created the need for section 94A, which states income and investments in other countries must be declared. As Mahatma Gandhi once said,” Non-cooperation with evil is as much a duty as is co-operation with good”. The government of India(GOI) has negotiated and made agreements with different countries to create financial transparency and to curb black money. This guide covers Section 94A and how it will have a significant impact in the country.
Section 94A was introduced in Finance Act 2011 which empowered the Government of India(GOI) to notify any country that does not help India in exchange of Tax Information, which leads to rise in tax evasion. It deals with all transactions by individuals in declared or located Notified Jurisdictional Area (NJA).
After, ITR forum A.Y. 2014-2015 it was clear that taxpayers must disclose any type of transactions that has been made by an individual with a person located in jurisdiction notified under Section 94A of the Income Tax Act.
In this section, person located in NJA refers to —
As per section 94A of the Income Tax Act, the supposed tool box of countermeasures, which empowers the government of India to notify jurisdictions as NJAs. Consequently, in Nov 2013 Central Board of Direct (CBDT) notified Cyprus as NJA. This resulted in adverse tax consequences i.e., all transactions with any person in such NJA shall come under greater scrutiny and shall be subject to the following measures:
Now, India has negotiated a revised Tax Treaty with Cyprus and removed it from NJA by issuing notice dated 16 Dec 2016.
There is no doubt that introduction of this section has provided us a way to curb the generation and circulation of black money even oversees. But, a power given is only as good and wise as its user. There is a lot we can expect the government to do as till date only Cyprus has been declared as NJA, but there are lot of countries, islands where Indians have stashed their black money. Sooner or later our Government will have to deal with such countries and take appropriate steps.
Black money circulation must end and it will start from here. It is our duty to maintain transparency with our government rather than hiding and stealing money to save taxes. We at H&R Block provide tax planning, preparation and filing services to individuals, including non-resident Indians (NRIs) and expatriates. Use our Income Tax Calculator to figure out your tax amount for FY 2017 – 2018 by our expert advisors and certified professionals.