June 2, 2020 | Investopaper
The government has paved the way for formalization of income generation. It will provide tax exemption to those who are running business or earning income without registering in the permanent account number (PAN). The individual/business should pay tax of the fiscal year 2074-75 and 2075-76.
Provision has been made in the budget for the coming fiscal year to legalize such business and income by registering the business in PAN and paying tax only for the last two fiscal years. It is mentioned in the Fiscal Bill 2077 that this facility can be provided to both individuals and organizations by the end of Falgun of the next fiscal year.
Fiscal Bill 2077
Article 20 of the bill mentions exemption of fees and interest to those who come under the tax net. Sub-section 1 of the same article states, “If any person has earned taxable income in the past but has not paid tax on such income, such person should take PAN number and submit income statement of FY 2074/75 and FY 2075/76 next year. If it is submitted by Falgun 2077, the fee and interest on the tax will be deducted.”
Similarly, sub-section 2 of the same section states that if the income statement and tax is submitted as per sub-section (1), the income statement of the previous financial year and the tax fee and interest incurred on it will not have to be submitted. Pursuant to Sub-section 1, it is mentioned that the person who does not file tax with the income statement will be required to file the income statement for the period of earning income and the tax fee and interest will be charged. According to this provision, any person earning income outside the scope of tax can now make his formal property by paying tax.
However, for this, the source of such income will have to be disclosed. Illegally earned money will not be exempted from laundering black money under this provision. Anyone who has amassed wealth outside the tax net in the past or added wealth without paying any tax to the government will also be deducted from all past fines and interest amount after paying the tax for the last two years. On the other hand, sub-section 3 stipulates that the government will levy both fines and interest on those who do not come under the tax net.
Current Tax Provision
The government will provide such tax facility to the person within the limits of income tax. Currently, income tax of up to Rs 4 lakh is subject to 1 percent income tax. Similarly, income between Rs 4 lakh and Rs 5 lakh is taxed at 10 per cent. Income between Rs 5 lakh and Rs 7 lakh is taxed at 20 per cent. Likewise, the income between Rs 7 lakh and Rs 20 lakh is taxed at 30 per cent. And income above Rs 20 lakh is taxed at 36 per cent.
Each country relies on the guidance of the Financial Action Task Force (FATF) in France before issuing the Anti-Money Laundering Act. In particular, most countries in the world have been pursuing the Anti-Money Laundering Act following FATF guidelines to ensure that no individual or entity can move the money in a country illegally with the intent to use it in terrorist activities.