Select black money holders to get relief: Income tax dept. to not not apply penalty and prosecution in these situations
Aug 30, 2025
Synopsis
The Income Tax Department offers relief regarding unintentional black money. Individuals failing to disclose foreign assets up to Rs 20 lakh may avoid penalties and prosecution. This applies to assets excluding immovable property. The Central Board of Direct Taxes amended its instructions. The new rule aims to provide relief for unintentional omissions. It focuses enforcement on significant cases of non-disclosure.
The Central Board of Direct Taxes (CBDT) has amended its internal instructions dated August 18, 2025, regarding the Black Money Act, 2015. According to the said instructions prosecution proceedings under Section 49/50 would not be initiated in cases where penalty under Section 42/43 is not imposed or is ‘imposable’.
In simpler terms it means if someone doesn’t disclose foreign assets (excluding immovable property) valued up to Rs 20 lakh in total, he/she won’t face penalties under Sections 42 and 43, and also won’t be prosecuted under Sections 49 and 50.
This internal instruction circular about amended rules for the Black Money law, referenced in this article (F. No. 285/46/2021-IT(Inv.V)/88) dated August 18, 2025, is not available in public domain. ET Wealth Online has verified the authenticity of this circular through its sources. None of the information from the circular reported in this article has been altered or edited.
Check out the information below to learn more about the details about this amendment in rules for Black Money law and who benefits from these amended rules.
What did the Income Tax Department say about amended rules for Black Money law?
According to the Income Tax Department internal instruction dated August 18, 2025, here are the details:
“In view of the above and in exercise of powers under Section 84 of the BMA, 2015 read with Section 119 of the Income Tax Act,1961, the Board hereby amends Instruction dated 15.03.2022 and directs that prosecution proceedings under Section 49 and/or 50 of BMA, 2015, would not be initiated in cases where penalty under Section 42 and/or 43 of the BMA, 2015 is not imposed or imposable in relation to assets covered under the proviso to aforesaid sections i.e. an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed a value equivalent to Rs.20 lakh at any time during the relevant previous year.”
“This shall come into effect from the date when the amendment to Section 42 and 43 of BMA, 2015 became effective through Finance (No.2) Act, 2024.”
S Sriram, Executive Partner, Lakshmikumaran & Sridharan attorneys, says: “This amended rules means prosecutions initiated prior to October 1, 2024 would not be saved by this Instruction.”
What is the meaning of this instruction?
Chartered Accountant (Dr.) Suresh Surana explains that this instruction issued by the CBDT clarifies the scope of prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA, 2015).
Surana explains that "Earlier, individuals holding foreign bank accounts with small balances aggregating up to Rs 5 lakh during a year were protected from penalty and prosecution for non-disclosure, on the understanding that such omissions could arise from oversight or ignorance. Hence, the Finance (No. 2) Act, 2024 has amended the proviso to Sections 42 and 43 of the BMA, effective 1st October 2024, expanding this protection to cover all types of foreign assets (other than immovable property) where their aggregate value does not exceed Rs 20 lakh during the relevant year.”
Surana says:
● “Accordingly, the present instruction updates and supersedes the earlier one by extending relief from prosecution under Sections 49 and 50 of the BMA, 2015 in such cases.”
● “In effect, non-disclosure of foreign assets (excluding immovable property) valued up to Rs 20 lakh in total will not attract penalty under Sections 42 and 43, nor prosecution under Sections 49 and 50.”
● “This provides clarity, aligns departmental practice with the amended law, and ensures that only significant or deliberate cases of undisclosed foreign assets will attract penal consequences.”
Chartered Accountant Namrata Dedhia, Partner, Shah Dedhia & Associates, says that it is often seen that foreign bank accounts opened by a person when they were non-residents are missed to be disclosed in the return of income after such person becomes a resident, particularly where the balances in such accounts are not significant and the accounts are not regularly operated.
Dedhia says: "Levy of penalty and invoking of prosecution provisions in such cases only results in harassment of unaware assessees. The increased threshold will ensure that genuine cases are shielded from the rigours of not only the penalty sections but also the prosecution provisions. The need to amend the CBDT instruction from time to time to clarify when prosecution under BMA cannot be initiated can be eliminated if the exclusion can be introduced by way of provisos to the relevant prosecution sections in the same manner as the provisos to the penalty sections."
Due to this instruction which particular category of taxpayers now get relief ?
Surana explains which taxpayers might have benefited from this internal directive from the CBDT:
“The objective of this amendment is to provide relief to individuals who may have unintentionally failed to disclose minor foreign assets, while keeping the focus of enforcement on significant cases of non-disclosure. Under the earlier framework, only minor balances in foreign bank accounts not exceeding Rs. 5 lakh were excluded from the ambit of penalty and prosecution.”
“Following the amendment introduced by the Finance (No. 2) Act, 2024, and the consequent modification of the CBDT’s instruction, the relief has now been significantly widened.”
“Taxpayers possessing foreign assets such as bank accounts, investments, or other financial interests, where the aggregate value does not exceed Rs 20 lakh during the relevant year, are no longer exposed to penalty under sections 42 and 43 or prosecution under Sections 49 and 50 of the BMA, 2015.”
“This change is particularly beneficial for individuals with modest overseas holdings, ensuring that unintentional non-disclosure of such assets does not invite stringent penal consequences.”
What might be the objective behind this amendment?
Surana says that the objective of this amendment is to provide relief to individuals who may have unintentionally failed to disclose minor foreign assets, while keeping the focus of enforcement on significant cases of non-disclosure.
Surana says: “It enhances fairness in the law by recognizing the difference between material tax evasion and inadvertent omissions of low-value assets. As a result, holders of undisclosed foreign movable assets (such as bank accounts, shares, or securities) with an aggregate value not exceeding Rs. 20 lakh in any year will neither face penalties nor be subject to prosecution under the relevant provisions of the BMA.”
Sriram from Lakshmikumaran & Sridharan attorneys explains that post 2016, every person resident of India was statutorily required to disclose his/her foreign assets and income in the annual income-tax returns (ITR).
Sriram says: “Even if a person resident of India did not have any taxable income, but was holding any asset outside India or was earning income from a source outside India, he/ she was required to file an ITR and disclose the foreign assets and income.”
Sriram explains: “If for any year, the details are omitted to be disclosed, apart from higher taxes that can be levied there were risks of:
Penalty equal to 3 times the tax payable on the undisclosed income or asset,
A penalty of Rs 10 lakh for failure to furnish an ITR, or for failure to disclose the foreign assets or income in the return furnished,
or where disclosure is not accurately made (for every year in which the failure occurs).
Sriram says: “The individual, for the said offences (of not filing a ITR, or filing a ITR but not disclosing the foreign assets or income) can be imprisoned for a minimum period of 6 months.”
Sriram says that though the law exempted levy of penalty leviable where the undisclosed asset was a foreign bank account, with balance not exceeding Rs 5 lakh at any time, no exemption from prosecution was envisaged. “In other words, a person having a foreign bank account with Re 1 as balance may not be liable to a penalty if the details of the account is not disclosed, but can be sent to jail for six months,” says Sriram.
Sriram explains: “To overcome this anomaly and to provide some relief to tax payers, by an internal instruction issued in 2022, the Central Board of Direct Taxes clarified that, where the undisclosed asset is represented by foreign bank account with aggregate balance of less than Rs 5 Lacs, then the individual would not be subject to prosecution. The Instruction, aimed to protect individuals with small bank balances who might not have disclosed the bank accounts due to oversight, from dis-proportional harassment, would bind the Tax Authorities, even being not being strictly in compliance with law.”
Finance Act 2024 did not amend provisions relating to prosecution
Sriram explains that the Finance Act 2024 relaxed the provisions relating to levy of penalty, by
(i) increasing the monetary threshold for non levy of penalty to Rs 20 lakh, from Rs 5 lakh, and by
(ii) expanding the undisclosed assets that would not be subject to penalty to include all foreign assets other than immovable property, from the then contemplated asset of foreign bank account alone.
Sriram says: “The Finance Act, however, did not amend the provisions relating to prosecution. The Instruction of August 18, 2025 states that individuals who have omitted disclosing their foreign assets (other than immovable property) with aggregate value less than Rs 20 Lacs would not be prosecution, even though the law empowers the officers to prosecute them. The instruction would take effect from October 1, 2024, being the date on which the limit for levy of penalty was expanded.”
Dedhia explains: "The penalty provisions of the BMA for non-disclosure of foreign accounts or foreign income in the ITR were amended by Finance Act (No. 2) 2024 with effect from October 1,2024, wherein the threshold, for applicability of penalty, of aggregate value of foreign accounts during the previous year was raised from Rs 5 Lakh to Rs 20 Lakh. However, the prosecution provisions under BMA do not contain similar exception and relief from prosecution in case of non-disclosure of accounts with minor balances was provided only through CBDT instruction dated March 15, 2022. This instruction was not updated to increase the threshold for exception from prosecution provisions in line with the recent amendment in the penalty provisions, resulting in a mismatch in the exclusion carved out for non-disclosure.
What else did CBDT’s instruction say?
CBDT in its internal instruction said:
Subject: Amendment of Instruction issued under Section 84 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,2015 ("BMA, 2015") read with Section 119 of the Income tax Act,1961 regarding prosecution provisions under BMA, 2015-reg
1. Central Board of Direct taxes ('Board') had issued an Instruction, vide F.No.285/46/2021/IT (Inv.V)/645 dated 15.03.2022, clarifying that prosecution under Section 49 and/or 50 of BMA, 2015 shall not be initiated in cases where penalty under Section 42 and/or 43 of the BMA, 2015 is not imposed or imposable, in relation to assets covered under the proviso to aforesaid Sections i.e, an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to Rs 5 lakh at any time during the previous year.
The instruction aimed to protect individuals holding foreign accounts with minor balances that might not have been reported due to oversight or ignorance, by providing that non-disclosure of such accounts will not attract penalty or prosecution.
2. The Finance (No.2) Act. 2024 has substituted the proviso to Section 42 and 43 of the BMA, 2015 w.e.f 01.10.2024 and current proviso to Section 42 and Section 43 reads as under:
"Provided that this section shall not apply in respect of an asset or assets (other than immovable property) where the aggregate value of such asset or assets does not exceed twenty lakh rupees".
3. The amendment has expanded the scope of assets, which are not amenable to penalty provisions under Section 42 and/or 43 of the BMA, 2015, while the existing Instruction continues lo provides protection from prosecution proceedings only in respect of assets, which are covered by the unamended provisions.
4. The matter has been examined in Central Board of Direct Taxes ('Board') and in order to provide relief from institution of prosecution proceedings under Section 49 and/or 50 of BMA, 2015, in respect of asset(s) covered under the proviso to penalty provisions under section 42 and 43 of BMA, 2015, it has been decided to amend the Instruction dated 15.03.2022.
[The Economic Times]
