The amendment to the Income Tax Act, 1996, made by Finance Minister Nirmala Sitharaman in her first Union Budget, will now allow the government to recoup Income Tax dues from wilful defaulters who shift to foreign countries to evade tax, even if they don't have any property there.
Once the finance bill is passed by the Parliament, if India has a mutual agreement with the tax department authorities of other countries, the Indian Government can request those countries to recover income tax from these defaulters under Indian income-tax laws.
The earlier law (Section 228A of the Income Tax Act) had a big constraint for taxmen hoping to recover tax from defaulters who do not stay on Indian soil. It was mandatory for the taxmen in such instances to identify a property of the evader overseas to recover tax from the defaulters.
However, according to the new law, even if the Indian authorities have not identified a property belonging to the tax evader in the foreign country, they can now recover the taxes that are due with the help of tax officials from the country where the defaulter resides.
How taxmen can recover tax from overseas defaulters?
Firstly, India needs to declare the person as an income-tax defaulter.
Then, the officer in charge of collecting the tax must send a tax recovery certificate to the Central Board of Direct Taxes with the amount that needs to be recovered from the tax evader.
The Central Board of Direct Taxes will then intimate the foreign tax officials who can recover the tax dues from the defaulters on behalf of India.