Black Money Act is the common name for the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which imposes a flat 30% tax on undisclosed foreign income and assets of Indian residents and non-residents who were resident in India in previous years, plus a mandatory 30% penalty, and prescribes imprisonment of up to 10 years for wilful evasion. Under Indian law, the Act created a comprehensive framework for taxing and penalising hidden offshore wealth, supplementing the Income Tax Act and FEMA with specific provisions targeting foreign undisclosed income and assets.
Legal definition
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 provides:
Section 2(11) — "Undisclosed asset located outside India": An asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is not satisfactory.
Section 2(12) — "Undisclosed foreign income and asset": The total amount of undisclosed income of an assessee from a source located outside India and the undisclosed asset located outside India, referred to in Section 4.
Tax and penalty structure:
| Component | Rate | Section |
|---|---|---|
| Tax on undisclosed foreign income/assets | 30% flat (no deductions, exemptions, or set-off) | Section 3 |
| Penalty for non-disclosure | 30% of tax (i.e., additional 9% of income/asset value) | Section 10 |
| Effective rate | ~39% of undisclosed income/asset value | — |
Criminal penalties:
| Offence | Punishment |
|---|---|
| Wilful attempt to evade tax under this Act | Rigorous imprisonment 3-10 years + fine |
| Failure to furnish return of undisclosed foreign income | Rigorous imprisonment 6 months - 7 years + fine |
| Failure to disclose foreign assets in ITR | Rs 10 lakh penalty |
One-time compliance window (expired): The Act provided a one-time compliance opportunity (Sections 59-72) — a 90-day window in 2015 where persons could declare undisclosed foreign assets, pay 30% tax + 30% penalty (total 60%), and avoid prosecution. This window closed on September 30, 2015. Declarations made under this window were kept confidential and could not be used as evidence in any proceedings under the Income Tax Act, Wealth Tax Act, FEMA, Companies Act, or the Customs Act.
How courts have interpreted this term
Smt. Asha Agarwal v. Principal Commissioner of Income Tax [(2019) ITAT Delhi]
The ITAT held that the Black Money Act applies to undisclosed foreign assets regardless of when they were acquired. The Tribunal established that the obligation to disclose foreign assets in Schedule FA of the income tax return (introduced alongside the Act) is a continuing obligation — failure to disclose in any year triggers independent proceedings under the Act for that year. The Tribunal rejected the argument that assets acquired before the Act's commencement (April 1, 2016) were exempt.
CBDT Circular No. 15/2015 (Departmental Interpretation)
The CBDT clarified that the Act applies to all undisclosed foreign income and assets of a person who is (or was at any time) resident in India. This means an NRI who held undisclosed foreign assets while resident in India continues to be liable even after becoming non-resident. The Act also applies to persons who are residents in the year of assessment, regardless of when the foreign income was earned or the foreign asset was acquired.
Interpretation of "beneficial owner": The tax authorities have taken the position that beneficial ownership under the Act extends to: direct ownership, ownership through nominees, ownership through trusts where the assessee is the settlor or beneficiary, and economic interest in foreign entities. The standard of "beneficial owner" under the Act is broader than the FEMA or Income Tax Act definition.
Why this matters
The Black Money Act was a centrepiece of the Indian government's anti-black money legislative agenda, alongside demonetisation (2016), the Benami Transactions Prohibition Amendment Act (2016), and the Fugitive Economic Offenders Act (2018). It targets a specific category of evasion — the stashing of undisclosed wealth in foreign bank accounts, properties, trusts, and corporate structures.
For Indian residents, the Act creates a mandatory disclosure obligation through Schedule FA (Foreign Assets) of the income tax return. Every resident taxpayer must disclose all foreign bank accounts, financial interests, immovable properties, and other assets held outside India, even if no income is earned from them. Failure to disclose invites a penalty of Rs 10 lakh per year, in addition to tax and penalties on any undisclosed income from such assets.
The one-time compliance window in 2015 received a modest response — 648 declarations totalling Rs 4,164 crore in undisclosed assets, yielding approximately Rs 2,498 crore in tax and penalty. Critics argued the response was low because the 60% effective rate was too high compared to the earlier voluntary disclosure schemes. Proponents noted that the window was deliberately punitive to deter future evasion while giving a last opportunity for compliance.
For practitioners, the interplay between the Black Money Act, FEMA, the Income Tax Act, and DTAAs creates significant complexity in advising clients with legitimate foreign assets. The Act's penalty for non-disclosure of foreign assets (Rs 10 lakh per year, even for assets generating no income) makes accurate Schedule FA filing critically important.
Related terms
Related enforcement:
Related anti-evasion legislation:
Related frameworks:
Frequently asked questions
Do I need to disclose foreign bank accounts in my ITR?
Yes. Every person who is resident in India must disclose all foreign bank accounts (including dormant accounts), financial interests in foreign entities, foreign immovable property, and other foreign assets in Schedule FA of the income tax return. This obligation applies even if no income is earned from these assets. Failure to disclose invites a penalty of Rs 10 lakh under Section 43 of the Black Money Act.
What is the total tax and penalty on undisclosed foreign income?
The effective rate is approximately 39% of the undisclosed income/asset value — 30% tax under Section 3 plus a mandatory penalty of 30% of tax (effectively 9% of the income/asset value) under Section 10. No deductions, exemptions, or set-offs are available against undisclosed foreign income. In addition, if the evasion is wilful, criminal prosecution with imprisonment of 3-10 years may follow under Section 51.
Can the compliance window under the Act still be used?
No. The one-time compliance window under Sections 59-72 of the Act was available for a 90-day period ending September 30, 2015. It has expired and cannot be reopened. Persons who failed to avail of the compliance window must now disclose foreign assets through regular income tax returns and face the standard tax and penalty provisions of the Act.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.