s.3, BMA 2015 — Charge of tax on undisclosed foreign income and assets
The charging provision of the Black Money Act: a flat thirty per cent, and a proviso that decides which year a foreign asset is taxed in.
In force from 1 July 2015, but the charge operates only for assessment years commencing on or after 1 April 2016, so AY 2016-17 is the first year under the Act. The Income-tax Act, 2025 has not repealed or subsumed the Black Money Act, which continues as a separate enactment.
Income-tax Act, 1961
s.3, BMA 2015
Income-tax Act, 2025
Unaffected; the 2015 Act is a separate code
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 3(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 charges tax at a flat thirty per cent on the total undisclosed foreign income and asset of the previous year, for every assessment year commencing on or after 1 April 2016. The rate is fixed by the Act itself rather than by an annual Finance Act, and the statute contains no surcharge or cess machinery. The proviso is where the litigation is: an undisclosed asset located outside India is charged to tax on its value in the previous year in which the asset comes to the notice of the Assessing Officer, so an asset acquired years earlier is charged on its current value in a later year. Section 3(2) defines value as fair market value determined as prescribed. Section 5 bars every deduction and every set off of loss, but allows income already assessed under the Income-tax Act to be reduced from the value of the asset where the assessee proves the asset was acquired from it, proportionately in the case of immovable property. Section 4(3) keeps income charged under this Act out of total income under the Income-tax Act.
What the provision does
Imposes the charge, fixes the rate at thirty per cent, and through its proviso determines the previous year in which the value of an undisclosed foreign asset is brought to tax.
Threshold questions
- Is the person an assessee within section 2(2), tested on residence and not nationality
- Is the asset an undisclosed asset within section 2(11), meaning held and unexplained
- In which previous year did the asset come to the notice of the Assessing Officer
- Is the assessment year the one immediately following that previous year
- Has credit under section 5(1)(ii) been given for income already assessed, on current value and not on cost
In practice
The recurring disputes.
Which previous year the proviso fixes
The proviso turns on the asset coming to the notice of the Assessing Officer, while section 72(c) turns on the issue of a notice under section 10. Those are different events, often years apart. The Kolkata Bench of the Tribunal holds that the proviso governs and that section 72(c) cannot displace it; the Karnataka High Court has given section 72(c) full effect. The divergence is unresolved.
Value against cost, and the section 5 credit
The charge is on the value of the asset in the relevant previous year, not on what was paid for it. Where part of the investment came from taxed income, section 5(2) gives credit as a proportion of current value. Orders routinely allow credit for historical cost instead, which understates the relief substantially on an appreciated asset.
Undisclosed asset against unreported asset
Section 2(11) requires both holding and an absent or unsatisfactory explanation of the source of investment. An asset whose source is fully explained is not an undisclosed asset however defective the Schedule FA reporting was, and the exposure is then ten lakh rupees under section 43 rather than one hundred and twenty per cent of value.