Section 68 l Cash Credits
Circular No. 5 was issued by the Central Board of Direct Taxes on 20 February 1969. Its subject is Section 68 l Cash Credits.
States the position on money brought into India by persons of Indian origin returning to settle here. Money brought in by non-residents for investment or other purposes is not liable to Indian income-tax; the question arises only where there is no evidence that the amount is in fact such a remittance, in which case the Income-tax Officer may disbelieve the story and hold the money to have been earned in India. Where the money comes through banking channels, or as plant, machinery or stock-in-trade for which import permits were obtained, no question is asked about its origin. For money claimed to have been brought otherwise than through banking channels, Income-tax Officers have been instructed to admit such claims freely up to Rs. 50,000 in each case for migrants from Mozambique on or after 30-7-1962, from Zanzibar, Kenya, Tanzania and Uganda on or after 1-1-1963, from East Pakistan and Burma on or after 1-1-1964, and from West Pakistan on or after 1-10-1965, subject to four conditions. The migrant must have had no source of income in India, must have had sufficient resources in the foreign country, must have had no source of income in India or in any other foreign country before migration and not have been assessed as resident in India for the year preceding migration or earlier, and the amount must be brought into the books regularly maintained in India with intimation to the Income-tax Officer within two months of arrival.
It was represented to the Board that persons of Indian origin abroad who intend to return and settle in India fear that money they bring or remit will be taxed here, an apprehension the Board attributes to a lack of information about the correct legal position.
| Under the 1961 Act | Now |
|---|---|
| s.68 | s.102 |
SECTION 68 l CASH CREDITS
472. Persons migrating from West/East Pakistan, Burma, East African countries, namely, Mozambique, Zanzibar, Kenya, Tanzania andUganda - Claims as to origin of money/assets brought into India to be freely admitted up to a limit of Rs. 50,000 subject to certain conditions
1. It has been represented to the Board that persons of Indian origin residing abroad but intending to return to India and settle here permanently, apprehend that the money brought in or remitted from abroad by such persons might be subjected to income-tax in India. The apprehension appears to be due to lack of information regarding the correct legal position about the taxability of the remittances of money from abroad. The general position, in this regard, is clarified below.
2. Money brought into India by non-residents for investment or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact represents such remittance. In other words, in the absence of proper supporting evidence, the taxpayers’ story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India.
3. If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the Income-tax Officers as to the origin of the money or assets brought in. It is only in case where the money is claimed to have been brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of the money, that the department has to make enquiries about the source thereof. Even in these cases, having regard to the difficulties experienced by persons migrating from Pakistan, Burma and East African countries, instructions have been issued to the Income-tax Officers that such claims should be freely admitted up to the limit of Rs. 50,000 in each case provided the following conditions are satisfied :
1. The assessee migrated to India on or after the dates mentioned below from the countries shown against each and had no source of income in India :a.
30-7-1962
Mozambique [vide Ministry of Finance Press Note, dated 22-5-1967 (Circular No. 8, dated 22-5-1967 printed as Annex I)].
b.
1-1-1963
Zanzibar, Kenya, Tanzania and Uganda [vide Ministry of Finance Press Note, dated 22-5-1967 (Circular No. 8, dated 22-5-1967 printed as Annex I)].
c.
1-1-1964
East Pakistan and Burma [vide Ministry of Finance Press Note dated 15-6-1964/22-5-1965 (Circular Nos. 16D, dated 15-6-1964 and 11, dated 22-5-1965 printed as Annex II and Annex III respectively)].
d.
1-10-1965
West Pakistan [vide Ministry of Finance Press Note, dated 3-2-1969].
2. He had sufficient resources in the foreign country.
3. He had no source of income either in India or in any foreign country, other than the country from which he migrated, prior to migration and he was not assessed as "resident" in India either for the assessment year preceding the year in which he migrated or for earlier years.
4. The amount brought in has been duly introduced in the books regularly maintained in India and an intimation of such introduction is given to the Income-tax Officer within two months of the migrant’s arrival.
4. Cases not covered by preceding paragraph, namely :
a. where the money (in the case of Mozambique, Zanzibar, Kenya, Tanzania, Uganda, East Pakistan and Burma) and money and/or the personal jewellery in the case of West Pakistan claimed to have been brought exceeds Rs. 50,000; or
b. where the assessee had some sources of income either in India or in any foreign country, other than the one from which he had migrated, prior to migration; or
c. where the assessee was assessed as resident in India either for the assessment year preceding the year of his/her migration or in the earlier years,
will not be entitled to any special concession. Thus, any claim by such migrants that the funds or the jewellery have been brought from the abovementioned countries, will be accepted only if the persons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India can directly be linked with the said funds or wealth. In other words, these migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries. In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India their bank accounts in those countries as also copies of the assessment orders passed in their cases by the income-tax authorities of those countries. The migrants would also then be required to prove that the amounts brought into India can directly be linked with the funds which they had possessed in those countries.
Circular : No. 5 [F. No. 73A/2/69-IT(A-II)], dated 20-2-1969.
On a section 68 addition for capital introduced by a returning migrant shortly after arrival in India.
Source: the Income Tax Department’s own published text — its page for this instrument.