How to respond to notices under Black Money (Undisclosed Foreign Income and Assets)
The Indian government has taken significant steps to curb black money and undisclosed foreign assets held by residents outside the country. One of the key legal tools in this effort is the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. If you’ve received a notice under Section 10(1) of this Act, it’s important to understand its implications, your rights, and the steps you must take for compliance.
Many cryptocurrency traders and investors hold assets on foreign exchanges like MexC or Huobi or Kraken, as well as in overseas wallets such as Metamask, Phantom, etc. All such individuals must disclose their foreign holdings when filing tax returns in India—failure to do so is a legal violation. Non-disclosure of foreign income and assets can result in severe penalties, including heavy fines and imprisonment under the Black Money Act.
Under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Indians who fail to declare foreign assets face a 120% tax on the undisclosed amount. Additionally, they may be subject to criminal prosecution, with potential imprisonment of up to 10 years.
The law enforces strict taxation on undisclosed foreign income and assets, with harsh penalties, including:
A penalty of three times the tax amount
Rigorous imprisonment for up to a decade
The primary objective of this act is to combat black money by ensuring transparency in foreign financial holdings and imposing heavy taxes and penalties on undisclosed assets.
This article breaks down the meaning and implications of such notices, outlines what you are required to do, and provides a step-by-step guide to filing a response.
Contact us via WhatsApp: Click Here or Email: info@mnpartners.in CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.
Table of Contents
What is Section 10(1) of the Black Money Act?
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was introduced to detect, assess, and tax undisclosed foreign assets and income of Indian residents.
Section 10(1) of this Act empowers the tax authorities to issue a notice to a taxpayer for the assessment or reassessment of undisclosed foreign income or assets. Such a notice essentially informs the recipient that the tax department has initiated proceedings related to undeclared foreign income or assets.
Why Did You Receive a Notice?
Receiving a Section 10(1) notice generally means that the Income Tax Department suspects or has evidence that you have not fully disclosed certain foreign assets or income in your tax filings.
The notice typically demands:
Details of all foreign assets or investments you have held during a specified period.
Bank account information of foreign accounts held in your name or by your business entities.
Proof of disclosures made in your Income Tax Returns (if any) regarding these assets and incomes.
Details of Virtual Digital Assets (VDA) transactions conducted during the relevant financial years.
In most cases, this notice is issued if:
There is information received from foreign authorities, Crypto Exchanges or financial institutions.
There are discrepancies between disclosures in returns and information available with the department.
There are red flags in financial transactions (especially involving cross-border flows or cryptocurrency).
Contact us via WhatsApp: Click Here or Email: info@mnpartners.in CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.
What Information Do These Notices Require?
As per the annexure attached to such notices, taxpayers are often required to provide:
1. Details of Foreign Assets/Investments
List all foreign assets and investments held between the financial years specified in the notice (often spanning multiple years).
Include properties, equity holdings, partnerships, and any other assets located outside India.
2. Foreign Bank Accounts
Provide details of all foreign bank accounts (individual or business).
Furnish bank statements for the specified period (in this case, six financial years).
3. Disclosures in Tax Returns
Clarify whether these assets and incomes were reported in your tax returns.
Provide copies of the corresponding income tax returns.
4. Virtual Digital Asset Transactions
If you have traded or held cryptocurrencies or other digital assets, furnish complete details of such transactions.
This information helps the tax department evaluate whether you have complied with disclosure requirements under Indian tax laws.
Contact us via WhatsApp: Click Here or Email: info@mnpartners.in CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.
Consequences of Non-Compliance
Ignoring such notices can lead to serious consequences, including:
Heavy penalties: Under the Black Money Act, penalties can go up to ₹10 lakh per year for failure to disclose foreign assets.
Prosecution: In severe cases, imprisonment of up to 10 years may be imposed.
Seizure of assets: Non-disclosed foreign assets can be taxed at flat 30%, in addition to penalties and interest.
The law treats these matters with utmost seriousness, and non-compliance can quickly escalate.
How to Respond to a Section 10(1) Notice
Here’s a step-by-step guide to filing a response when you receive such a notice:
Step 1: Carefully Read the Notice
Note the assessment year and the deadline for compliance (in the sample notice, the compliance date is within 9 days).
Check whether the notice mentions specific assets or only seeks general information.
Step 2: Gather the Required Documents
Collect foreign bank account details, statements, investment records, and property documents.
Obtain copies of filed income tax returns for the specified years.
Prepare details of cryptocurrency or other virtual asset transactions, if any.
Step 3: Prepare a Disclosure Statement
Compile the information requested in a structured format.
Prepare a declaration that the information provided is accurate.
Step 4: Seek Professional Assistance
Engage our services where in an experienced Chartered Accountant (CA) who specializes in crypto taxation will review your case.
They can ensure all disclosures are complete and compliant with the law.
Step 5: Submit the Response
You can appear in person or through an authorized representative at the tax office mentioned in the notice.
Step 6: Follow Up
Keep track of any additional queries or hearings.
Maintain proper documentation of all submissions for future reference.
Contact us via WhatsApp: Click Here or Email: info@mnpartners.in CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.
Key Takeaways for Taxpayers
Disclosure is mandatory: All foreign assets and incomes must be reported in the Indian tax return if you are a resident taxpayer.
Act quickly: Notices under Section 10(1) come with short compliance timelines.
Penalties are severe: Non-compliance can lead to heavy fines and even imprisonment.
Seek expert help: Professional guidance can make the process smooth and ensure you remain compliant.
Digital asset reporting: With increased scrutiny on cryptocurrencies and VDAs, ensure that such transactions are disclosed.
Summary
Receiving a Section 10(1) notice under the Black Money Act is a serious matter. It indicates that the tax authorities are investigating potential non-disclosure of foreign assets or income. Such notices require you to furnish detailed information about foreign investments, bank accounts, income disclosures, and cryptocurrency transactions for multiple years.
The best way to deal with these notices is through timely and accurate compliance, ideally with the help of a qualified professional. Prompt action can help avoid penalties, legal trouble, and reputational damage.
By understanding the process, preparing your documentation, and seeking expert advice, you can effectively handle such notices and remain compliant with the law.
Contact us via WhatsApp: Click Here or Email: info@mnpartners.in CA Mitesh and Associates is India's leading CA Firm Firm with special focus on accurate Income Tax Return filing and Handling Income Tax Notices in India.
FREE Sample Response Formats for Section 10(1) Notices
When replying to a notice under Section 10(1), your response should be formal, factual, and well-documented. Below are templates you can adapt depending on your situation.
- Acknowledgment and Preliminary Response
To,
The Assistant Director of Income Tax (Investigation)
[Address of the office as mentioned in the notice]
Subject: Response to Notice under Section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for AY [Year]
Respected Sir/Madam,
I am in receipt of your notice dated [Date of Notice] under Section 10(1) of the Black Money Act, 2015.
Please find enclosed the preliminary details and documents as requested in the annexure to the notice. I am in the process of collating additional information from relevant institutions and will submit the remaining details by [expected date if additional time is needed].
I hereby declare that the information provided is true and correct to the best of my knowledge.
Thank you.
Yours faithfully,
[Signature]
[Full Name]
[Contact Information]
- Full Compliance Response
To,
The Assistant Director of Income Tax (Investigation)
[Address of the office as mentioned in the notice]
Subject: Submission of Information in Response to Notice under Section 10(1) for AY [Year]
Respected Sir/Madam,
With reference to the notice issued under Section 10(1) dated [Date], please find enclosed the following details as requested:
- **Foreign Assets/Investments**: A detailed list of foreign assets and investments held during FY [Years] with supporting documents (Annexure A).
- **Foreign Bank Accounts**: Details and copies of statements for all foreign bank accounts operated between 01.04.[Year] and 31.03.[Year] (Annexure B).
- **Income Tax Returns**: Copies of relevant returns reflecting disclosures, where applicable (Annexure C).
- **Virtual Digital Asset Transactions**: Comprehensive details of cryptocurrency or other digital asset transactions conducted during the specified period (Annexure D).
I confirm that the information provided is accurate and complete to the best of my knowledge.
Yours faithfully,
[Signature]
[Full Name]
[Contact Information]
- Request for Extension
If you cannot compile all details within the deadline, request additional time:
To,
The Assistant Director of Income Tax (Investigation)
[Address of the office as mentioned in the notice]
Subject: Request for Extension of Time for Compliance with Notice under Section 10(1)
Respected Sir/Madam,
I acknowledge receipt of your notice dated [Date] under Section 10(1) of the Black Money Act for AY [Year].
Due to the extensive nature of information requested, I kindly request an extension of [number of days/weeks] to gather the required details and submit a comprehensive response.
I assure you of my full cooperation in this matter.
Thank you for your understanding.
Yours faithfully,
[Signature]
[Full Name]
[Contact Information]
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