Pradhan Mantri Garib Kalyan Yojana (2016) Deposit Scheme

 

Pradhan Mantri Garib Kalyan Yojana (2016) Deposit Scheme

Post demonetization, the Union Government of India announced a brand-new scheme which aimed towards flushing out black money from Indian economy. The good thing about the scheme is that those who opt for this scheme and deposit their undeclared and unaccounted money voluntarily, will get immunity from various laws that can prosecute a black money hoarded.

There weren’t enough details available on this new scheme, which goes by the name ‘Pradhan Mantri Garib Kalyan Deposit Scheme’, also sometimes referred to as Pradhan Mantri Garib Kalyan Yojana. Now that new information has been released about the scheme, here is a detailed article on this scheme, which will spell out the steps you need to follow in order to deposit money into the scheme.

However, before we proceed with the lengthy article, let us give you a quick snapshot of the scheme in a tabular format, which will allow you to keep the important points in mind.

Snapshots of Pradhan Mantri Garib Kalyan Deposit Scheme

Specifications Details in brief
Name of yojana Pradhan Mantri Garib Kalyan Deposit Scheme.
Inception date December , 2016.
Ending date March 31, 2017.
Purpose Last window provided to hoarders of black money to declare their unaccounted money.
Taxation Total 50% of black money (broken down into several components) for getting immunity against prosecution.
Mandatory investment Another 25% of unaccounted money will be mandatorily invested in several investment instruments.
Interest returns Person declaring the black money will not get any interest earning from the invested money.
Lock in period for investment 4 years – mandatory – no scope of partial or premature withdrawal once invested.
Immunity Will get immunity against prosecution against several income tax laws which can lead to imprisonment. However, immunity will not be available in case of criminal charges.

Okay, that’s a quick overview of the yojana. However, that’s not very detailed. The sections that follow will give details of the scheme, the method of deposit, the form to be used for deposit, details about mandatory investment and even the details of what will happen if the unaccounted money is not disclosed under this scheme.

A Walkthrough of Salient Features of the Scheme

We just took a snapshot of the features in the table above. Let us take a more detailed look at the salient features of the scheme.

The Pradhan Mantri Garib Kalyan Deposit Scheme says:

Features Explanation
Anyone can declare The scheme is designed for people in general who have hoarded black money. So, anyone who wishes to get immunity and keep identity secret can declare the unaccounted income.
Cash deposits Anyone can deposit cash in post office or in bank or with any other entity that has been specified by the government.
Section 199C (1) The Pradhan Mantri Garib Kalyan Yojana comes under the Taxation and Investment Regime. Declaration of unaccounted money is to be made under section 199C, subsection 1 of the regime.
Tax to paid on income declared 30% of the declared income will be taken as tax.
Penalty to be paid on income declared Apart from the 30% tax, the person declaring the unaccounted money will have to pay another 10% of the total income declared as penalty for holding that unaccounted money.
Pradhan Mantri Garib Kalyan Cess This is another amount that the person needs to pay. This cess will be charged on the tax which has been paid (that is 30% of the declared unaccounted money). The rate of this cess will be 33% of the taxed amount.
Total payable The total amount that one needs to pay if he or she declares unaccounted money under the Pradhan Mantri Garib Kalyan Yojana will be Tax + Penalty + Cess on Tax. This stands to 50% of the total unaccounted money which will be declared.
Mandatory deposit Apart from the 50% of the money that will be taken away as Tax + Penalty + Cess, one needs to pay another 25% of the unaccounted money which will be declared. This 25% will be invested. This deposit that one needs to make will go under the Pradhan Mantri Garib Kalyan Deposit Scheme.
No interest The 25% that will be deposited in the Pradhan Mantri Garib Kalyan Deposit Scheme will get invested. However, the person will not earn any kind of interest earning on the invested amount.
Lock in period The money (25%) that will be taken for Pradhan Mantri Garib Kalyan Deposit Scheme will be locked in investment for a period of 4 years straight. The person will be in no position to claim that money within these 4 years.
Bonds Ledger Account tradability The money that will be invested will go into Bonds Ledger Account and the person will become the holder of such account. However, the account cannot be traded under any circumstances.
Repayment The Bond Ledger Account cannot be redeemed any time before the lock in period expires. This means, the account will stay active for 4 years straight and no premature withdrawal can be made. Such withdrawals are forbidden and hence, any such request will not be entertained by the government. The money (25% of the unaccounted money that is invested in the Pradhan Mantri Garib Kalyan Deposit Scheme) will be returned or repaid back to the person only when the 4-year tenure of the lock in period ends.
Exempted from total income Once a person declares the unaccounted money under the Pradhan Mantri Garib Kalyan Yojana, the money will not be counted as part of total income for income tax assessment for any year (current, previous or future). It will just be a separate income (unaccounted money), which will be taxed separately as per the laid rules.
Confidentiality Whatever income is declared under the Pradhan Mantri Garib Kalyan Yojana will be kept as strictly confidential. Such income will not be used as evidence in case of any case under Wealth Act, Companies Act, Central Excise Act, etc.
No immunity against criminal act In case a criminal case pops up against the unaccounted money, the declarant will not be granted any immunity against Criminal Act under the Scheme’s section 199-O.

What if the income is not declared under the scheme and declared in returns?

If a person decides not to use the Pradhan Mantri Garib Kalyan Yojana or Pradhan Mantri Garib Kalyan Deposit Scheme but instead decides to declare the income in income tax return, the following charges will be levied:

1. Income tax on the income declared under income tax return: 60%
2. Surcharge on tax collected under income tax return: 25%
3. Cess on the income tax and surcharge applied on the unaccounted income declared under income tax return: 3%
Total tax liability 77.25% of the total unaccounted money.

What if the income is not declared even under income tax return?

This is yet another possible scenario where a person decides to do nothing and sit quietly. In such a case, if the Income Tax Department conducts detects unaccounted money without conducting any kind of search or raid, the following tax liabilities will kick in:

1. Income tax on the income declared under income tax return: 60%
2. Surcharge on the tax collected under income tax return: 25%
3. Cess on the income tax and surcharge applied on the unaccounted income declared under income tax return: 3%
4. Penalty of 10% on the total unaccounted money.
Total tax liability 87.25% of the total unaccounted money.

Numerical examples for each scenario

We gave three conditions:

  1. Income is declared under Pradhan Mantri Garib Kalyan Deposit Scheme.
  2. Income is declared under Income Tax Return
  3. Income is not declared in any and the Income Tax Department detects the money without conducting any kind of search or raid.

What will be the tax implications in each scenario? Let us understand the same using numerical examples for each case.

Before we start with the examples, we simply make an assumption that the total unaccounted money in hand is INR 10 lakhs (INR 10,00,000).

Numerical example for Scenario 1: Declaration under Pradhan Mantri Garib Kalyan Deposit Scheme

Total unaccounted money: INR 10 lakhs REFUND (IF ANY)
Tax on unaccounted money 30% of unaccounted money In case of example, INR 3,00,000 or INR 3 lakhs NOT REFUNDABLE
Penalty for holding unaccounted money 10% of unaccounted money In case of the example, INR 1,00,000 or INR 1 lakh
Pradhan Mantri Garib Kalyan Yojana cess 33% of the tax taken In case of the example, INR 99,000.
Total payable tax 49.9% of the total unaccounted money In case of the example, INR 4,99,000 or INR 4 lakhs and 99 thousand.
Mandatory investment 25% of unaccounted money In case of example, INR 2 lakh and 50 thousand or INR 2,50,000 REFUNDABLE AFTER 4 YEARS
Money that can be kept (100% – 49.9% -25%) = 25.1% In case of example, INR 2 lakh and 51 thousand or INR 2,51,000 NOT APPLICABLE
Total money that can be kept after 4 years 25% (amount that will be refunded after 4 years) + 25.1% In case of example, INR 5 lakhs and 1 thousand or INR 5,01,000 NOT APPLICABLE

Numerical example for Scenario 2: Income declared under Income Tax Return

Total unaccounted money: INR 10 lakhs REFUND (IF ANY)
Tax on unaccounted money 60% of unaccounted money In case of example, INR 6,00,000 or INR 6 lakhs NOT REFUNDABLE
Surcharge on unaccounted money 25% of tax collected on unaccounted money In case of example, INR 1,50,000 or INR 1 lakh and 50 thousand
Cess 3% of (the tax taken + surcharge applied) In case of example, INR 22,500
Total payable tax 77.25% of the total unaccounted money In case of the example, INR 7,72,500 or INR 7 lakhs, 72 thousand and 500 hundred
Money that can be kept 22.75% of the total unaccounted money In case of the example, INR 2,27,500 or INR 2 lakhs, 27 thousand and 500 hundred NOT APPLICABLE

Numerical example for Scenario 2: Unaccounted money is neither declared under Pradhan Mantri Garib Kalyan Deposit Scheme and not under Income Tax Return but is detected by Income Tax Department.

Total unaccounted money: INR 10 lakhs REFUND (IF ANY)
Tax on unaccounted money 60% of unaccounted money In case of example, INR 6,00,000 or INR 6 lakhs NOT REFUNDABLE
Surcharge on unaccounted money 25% of tax collected on unaccounted money In case of example, INR 1,50,000 or INR 1 lakh and 50 thousand
Cess 3% of (the tax taken + surcharge applied) In case of example, INR 22,500
Additional penalty 10% of undeclared money In case of example, INR 1,00,000 or INR 1 lakh
Total payable tax 87.25% of the total unaccounted money In case of the example, INR 8,72,500 or INR 8 lakhs, 72 thousand and 500 hundred
Money that can be kept 12.75% of the total unaccounted money In case of the example, INR 1,27,500 or INR 1 lakh, 27 thousand and 500 hundred NOT APPLICABLE

Now that we have discussed the Pradhan Mantri Garib Kalyan Deposit Scheme and possible scenarios in details, let us take a look at the method of depositing money under the scheme.

Declaring and Depositing Unaccounted Money Under Pradhan Mantri Garib Kalyan Deposit Scheme

As we have seen previously in this article, the total tax liability under the Pradhan Mantri Garib Kalyan Deposit Scheme is 49.9%. This is the last chance for those who have black money hoarded. Here is something you need to know about declaring black money under this scheme:

  • Nearly 50% of the money has to be paid off a tax and penalty if a person wants to avoid prosecution under various acts such as Companies Act, Wealth-tax Act, Central Excise Tax etc.
  • No immunity will be granted for criminal cases under the Section 199-O of the aforementioned scheme.
  • A person needs to use a form for declaring the unaccounted money. It is a two-page form, which is pretty simple. Mentioning the income source is not necessary for declaration under this amnesty scheme.
  • Details like office and residence address, PAN, email, phone numbers etc. are to be mandatorily filled in.
  • Details of the bank or the post office where the money has been deposited after demonetization of high value currency notes.
  • Furnish the details of payment of tax (49.9%).
  • A declaration is to be given to Commissioner of Income Tax or Principal Commissioner is to be given. This declaration can be made electronically using what is known as digital signature or one can use the conventional printed form with proper signature.
  • A certificate will be issued to the person declaring unaccounted income. This certificate will come from Income Tax Department. The certificate will be provided with 30 days from the date on which all details (documents along with tax payment receipt) have been paid.
  • Mandatory interest-free investment of 25% of the unaccounted income is to be made under the scheme with a lock-in period of 4 years. This investment has to be made only after the tax liability has been paid off.

Declaration Form

As we have mentioned above, a declaration has to be made and handed over to the Commissioner of Income Tax. That declaration has to be submitted using a form which has been specially designed for the same. The form is known as Form 1. A screenshot of the form has been provided below:

Certificate Provided by Income Tax Department

As we mentioned earlier that once the income has been declared and all necessary documents have been furnished (including the payment receipt of the tax paid), the department will issue a certificate. This certificate will be issued within a month (or 30 days) from the date on which the declarant provides all necessary documents. A screenshot of the form or the certificate which is issued by the Income Tax Department is provided below:

But…

How to Deposit 25% the Unaccounted Income Under Pradhan Mantri Garib Kalyan Deposit Scheme?

Depositing 25% of the unaccounted income under the Pradhan Mantri Garib Kalyan Deposit Scheme is not at all a tough nut to crack. There is a specific form which has been designed for the purpose. This form can be downloaded directly from this link. This form, which is designed specifically for declaring unaccounted money has been named as Form II.

There are several sections of the form which should be filled in accurately. The details of the form have been discussed in brief in the table below, followed by a screenshot of the form which needs to be filled:

Details of the form

Deposit Amount 1. The money to be deposited should not be less than 25% of the unaccounted income which has been declared.
2. Deposits should be made in multiples of INR 100.
3. Deposits can be made using demand draft, cheque or cash. If demand draft or cheque is used, it should be drawn in favor of the bank which has been authorized to accept such deposits.
4. Funds can also be transferred electronically if one wants to do that.
5. The deposit should be paid in a single go. There is no such rule wherein a person will be allowed to pay in installments.
Name Full name of the person or the owner of the money must be provided on the form.
PAN or Permanent Account Number Providing PAN is mandatory. However, it may happen that the declarant does not have a PAN. In that case, he or she will have to apply for PAN and then provide the proof of such application along with the acknowledgement number which is provided during PAN application.
Bank account details Government will handover the redemption proceeds. Government will do so by directly crediting the money to the bank account of the person. Thus, providing the necessary details about the bank account is also mandatory. The required bank details include the following:

·         Name of the bank

·         Branch of the bank

·         Account number

·         IFSC or Indian Financial Services Code.

Nomination The declarant may want a nominee. In that a case, the form also has option for declaring nominee.
Address The person needs to provide full address.
Signature The person needs to provide signature. In case the person is illiterate and can provide only thumb impression, two witnesses will be required who need to furnish their name, address and signature.

A snapshot of the form is given below:

Where Can One Deposit the Money Under Pradhan Mantri Garib Kalyan Yojana?

This is yet another pressing concern. However, things have been simplified and clarified from the Union Government. In order to deposit the money under Pradhan Mantri Garib Kalyan Yojana, one needs to visit an authorized bank. Read the information below carefully to know more details:

  • The money can be deposited with an authorized bank.
  • The bank needs to follow the Banking Regulation Act of 1949.
  • Once the money is deposited in an authorized bank, the bank will be responsible for furnishing the necessary information to Revenue Department of Finance Ministry of Government of India. The information should be provided electronically through a form known as Form V.
  • The bank needs to provide the information by the next working day (from the day on which the deposit has been made).
  • The Revenue Department will be verifying the provided information provided with respect to the deposit made, before it accepts the declaration.
  • Deposit details are to be uploaded to e-kuber – the core banking solution of Reserve Bank of India. The responsibility of uploading this information to e-kuber lies with the bank which accepted the deposit.
  • It will be the responsibility of the bank which received the deposit and of the Reserve Bank of India to maintain confidentiality of all data.

A snapshot of Form V is given below:

Proof of the Deposit That Is Made Under Pradhan Mantri Garib Kalyan Deposit Scheme

Maintaining transparency is one of the core objectives of the current ruling government of India. In order to maintain that transparency, the government pledges to provide a proof that the money was deposited under the Pradhan Mantri Garib Kalyan Deposit Scheme. This proof will be provided to the person making the deposit.

The proof is nothing other than the Bonds Ledger Account. Here are some details that you should know in this regards:

  • The date or day on which the cash will be deposited or the date or day on which the cheque or demand draft will be realized by the receiving bank, the Bonds Ledger Account will be created for the person depositing the money.
  • The Bonds Ledger Account will be held by Reserve Bank of India. That is, the account of the person depositing the money will be maintained directly by Reserve Bank of India.
  • The money deposited by the person will be shown as credit balance in the account (which means, the money belongs to the person on whose name the account has been opened).
  • The money kept in the Bonds Ledger Account cannot be redeemed before 4 years. Once 4 years expire, the amount will be paid back to the person in his or her desired account.
  • The deposit which will be received by the Reserve Bank of India in the Bonds Ledger Account of a person will be transferred to Government of India’s Public Account’s designated Reserve Fund.
  • The Reserve Bank of India will issue a certificate to the person declaring the black money. This is nothing but a Certificate of Holding, which simply proves that the Reserve Bank of India is operating a Bonds Ledger Account on the name of the declarant where the declarant has deposited a certain amount of money. This certificate is basically a form which is known as Form I.

Nomination Details as Offered by Pradhan Mantri Garib Kalyan Deposit Scheme

The declarant under the Pradhan Mantri Garib Kalyan Deposit Scheme can actually nominate one or multiple people for the Bonds Ledger Account. This nomination can be done directly in Form II as given above or it can be done separately in Form III

The form can be accessed through this link.

In case the declarant dies before the completion of the compulsory 4-year investment period is over, the nominee declared by the declarant will be eligible for the balance in the Bonds Ledger Account. Here are some important details about nomination that one should know:

  • In case the declarant declares a minor as a nominee, the declarant can actually nominate a third person (an adult) to receive the money from the Bonds Ledger Account and be the guardian holding the money on behalf of the minor.
  • A previously made nomination by the declarant can be discarded completely using a fresh nomination form. Nomination can be completely cancelled as well. In either case, the declarant needs to use another form known as Form IV.
  • Whether a nomination is made, a nominee is changed or a nominee is cancelled, the details must be registered with Reserve Bank of India. The responsibility of informing the Reserve Bank of India of any such changes lies with the authorized bank through which the declarant is making such changes. Any changes made will be effective from the date on which such a change has been registered with Reserve Bank of India.
  • If there are multiple nominees and one of the nominees die before the Bonds Ledger Account becomes mature (that is before the completion of 4 years), the amount in the Bonds Ledger Account will go to the surviving nominee(s) provided the declarant also died before the account became mature.
  • In case the nominees die before the Bonds Ledger Account becomes mature and the declarant survives, the money will go to the declarant after the account becomes mature. Alternately, in case of death of the nominee(s) before the maturity of the Bonds Ledger Account, the declarant will have the freedom of making fresh nomination(s).

Various Forms Under Pradhan Mantri Garib Kalyan Deposit Scheme

Though we have already spoken about all the forms under Pradhan Mantri Garib Kalyan Deposit Scheme, they have been presented in a scattered format. That may be slightly difficult to remember. So, for the sake of simplifying the overall information, here is a quick list of all forms that will be used under Pradhan Mantri Garib Kalyan Deposit Scheme in a tabular format:

Form Name Details
Form 1 This form will be used for declaring unaccounted cash under the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016.
Form 2 This form will be used as a proof of declaration of unaccounted cash under the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016.
Form I This form will be used by Reserve Bank of India to issue the Certificate of Holding after the declarant deposits 25% of unaccounted money under the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016.
Form II This form will be used for depositing 25% of unaccounted money under the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016.
Form III This form will be used by the declarant to nominate people for the Bonds Ledger Account.
Form IV This form will be used by the declarant to make changes to the nomination details as declared under the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016. The changes here refer to replacement of nominees or complete cancellation of nomination.
Form V This form will be used for providing deposit details (25% of unaccounted money) to Reserve Bank of India. The information will be furnished electronically and the bank where the money is deposited will be responsible for furnishing the information to Reserve Bank of India.
Please note the difference between the Hindu-Arabic Numerals (0, 1, 2, 3, …) and Roman Numerals (I, II, III, IV…)

Conclusion

The Pradhan Mantri Garib Kalyan Yojana and Pradhan Mantri Garib Kalyan Deposit Scheme is designed for providing a last opportunity to the black money hoarders to come out clean by playing by the rules laid down by the new amendments of the Income Tax Act. Failure to comply will lead to massive penalties and prosecution. This will mean that a person will not only have to pay more than what he or she hoarded as black money but will also be jailed for the same. The person will lose his or her social reputation and needless to say, the government will unearth financial details of the person’s family from the long past. So, it is wise to comply and get immunity from prosecution under various acts. However, it is worth mentioning that if there is something criminal, the Pradhan Mantri Garib Kalyan Deposit Scheme of 2016 will not provide any immunity against criminal act and the person will be tried under Indian Penal Code. The consequences will be harsh!

Other Articles

Pin It on Pinterest

Share This