Direct Tax Laws & International Taxation · Provisions to Counteract Unethical Tax Practices

Black Money Act: Scope and Charge of Tax (CA Final DT)

Updated 5 October 2026 · Fact-checked

The Black Money Act, 2015 taxes undisclosed foreign income and assets of a resident other than not ordinarily resident. Tax is charged at 30% on the total undisclosed foreign income and asset value of the tax year, with no deduction or loss set-off. To solve: check residence, identify undisclosed items, value them, add without double counting, apply 30%.

Understand Black Money Act: Scope and Charge of Tax

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 is a separate law from the Income-tax Act. It targets money and property that Indians hold abroad but have not reported in India. It has its own charge, its own rate and its own penalty and prosecution rules.

Two things are taxed. The first is undisclosed foreign income: income from a source located outside India that you did not disclose in your return of income. The second is an undisclosed foreign asset: an asset located outside India, including a financial interest in a foreign entity, that you hold (or benefit from) and have not properly disclosed or explained. The Act uses the term previous year; for your Income-tax Act, 2025 answers, read it as the tax year.

The residence condition is the gatekeeper. The charge applies only to an assessee who is resident in India, other than not ordinarily resident, in that tax year. In practice, that means a resident and ordinarily resident (ROR). A non-resident or a resident but not ordinarily resident (RNOR) is outside the charge. Always decide residential status first, using the residence rules you studied earlier.

The charge is simple. Tax is levied at a flat 30% on the total undisclosed foreign income and asset of the tax year. The asset is taken at its fair market value (FMV), computed as per Rule 3 of the Black Money Rules, as on the relevant date prescribed there. The Act refers to the value in the year in which the asset is chargeable. The income used to acquire the asset sits in the income limb and is also reflected in the asset's FMV. So the amount already included as income and invested in the asset is deducted once, and nothing is counted twice. So:

Base = Undisclosed foreign income (including the income used to acquire the asset) + FMV of the asset − income already included that was invested in the asset.

Put simply, the asset is taken at FMV, and the amount already taxed as income is deducted so that it is not counted twice.

Income chargeable under this Act is not included in total income under the Income-tax Act, for the same income or asset. The Act allows no deduction, allowance or set-off of loss against the base. Penalty, prosecution and procedure are a separate topic.

Key rules to remember

Charge of tax: Tax = 30% × Total undisclosed foreign income and asset of the tax year; Flat rate. No basic exemption limit, no slab, no deduction, no loss set-off.
Total undisclosed foreign income and asset: Undisclosed foreign income (including income used to acquire the asset) + FMV of the undisclosed foreign asset − income already included that was invested in the asset; The asset is taken at FMV (Rule 3 of the Black Money Rules). The amount already included as income and invested in the asset is deducted so the same rupee is not taxed twice.
Residence condition: Charge applies only if assessee is Resident and Ordinarily Resident in the tax year; Non-resident and RNOR are outside the charge.
Valuation of asset: Value = Fair market value of the asset, computed as per Rule 3 of the Black Money Rules, as on the relevant date prescribed there; The Act refers to the value in the year in which the asset is chargeable. Use the value given in the question. Do not use cost unless the question says so.
Undisclosed foreign income: Income from a source outside India not disclosed in the return of income; If it was properly disclosed in the return, it is taxed under the Income-tax Act, not this Act.

How to solve Black Money Act: Scope and Charge of Tax questions

Use this order for any question on scope and charge. It keeps you from missing the gatekeeper test and the double-counting adjustment.

1Determine the residential status for the tax year. If the assessee is non-resident or RNOR, state that the Act does not apply and stop.
2List every foreign item in the facts: income from foreign sources, bank balances, property, shares, and financial interests in foreign entities.
3Test each item for disclosure. Was the income reported in the return? Was the asset disclosed or acquired from disclosed, taxed sources? Only undisclosed items enter the base.
4Compute undisclosed foreign income of the tax year, including the income used to acquire the undisclosed asset.
5Take the fair market value of each undisclosed asset, computed as per Rule 3 of the Black Money Rules, and add it to the undisclosed foreign income from step 4.
6Deduct the income already included in step 4 that was invested in the asset, so that it is not counted twice. Do not deduct expenses or set off losses.
7Apply 30% to the total and state the tax.
8Write the conclusion in provision, facts, conclusion form, and note that income chargeable under this Act is not included again in total income under the Income-tax Act, for the same income or asset.

Quickest way: Three-gate check: Residence, Disclosure, 30%

When to use it: Use in MCQs and short case scenarios where you need the tax figure fast.

Gate 1: Is the person ROR? If not, tax is nil under this Act.
Gate 2: Strike out everything disclosed in the return or acquired from disclosed, taxed sources.
Gate 3: Take the undisclosed income, add the asset's FMV, subtract the income invested in the asset, and multiply by 30%.

Common mistakes in Black Money Act: Scope and Charge of Tax

Applying the Act to an RNOR or non-resident.
Students remember that the Act deals with foreign income and forget the residence condition.
Fix: Make residential status your first line. Only a resident who is not RNOR is chargeable.
Applying slab rates or the basic exemption limit.
Habit from normal income tax computation.
Fix: The rate is a flat 30% on the whole base. There is no exemption limit and no deduction.
Counting the income and the asset bought from it in full, so the same money is taxed twice.
Students add income and asset value without adjusting.
Fix: Take the income in full, add the asset at FMV, then deduct the income already included that was invested in the asset.
Setting off foreign losses or deducting expenses against the base.
Students carry the logic of heads of income into this Act.
Fix: State that no deduction, allowance or loss set-off is allowed against undisclosed foreign income and asset.
Taxing disclosed foreign income under this Act.
Students see foreign income and assume it is black money.
Fix: Income disclosed in the return is taxed under the Income-tax Act. Only the undisclosed portion falls here.
Using cost of acquisition for valuation.
Confusion with capital gains.
Fix: Use the fair market value for the tax year, as given in the question or computed under the rules.

Worked examples

Example 1

Meera is resident and ordinarily resident in India for the tax year 2026-27. She earned ₹5,00,000 from a business abroad and did not disclose it in her return. She invested the whole ₹5,00,000 in shares of a foreign company, held in her name. The fair market value of the shares, computed as per Rule 3 of the Black Money Rules, is ₹5,50,000. Compute the tax under the Black Money Act, 2015.

Show the solution

Residence: Meera is ROR, so the residence condition is met and the Act applies.
Undisclosed foreign income: ₹5,00,000, from a foreign source and not disclosed in the return.
Undisclosed foreign asset: the shares are held abroad and funded from undisclosed income. The asset is taken at FMV, computed per Rule 3, which is ₹5,50,000.
Add income and asset: ₹5,00,000 + ₹5,50,000 = ₹10,50,000.
Avoid double counting: deduct the income already included that was invested in the asset. ₹10,50,000 − ₹5,00,000 = ₹5,50,000.
Total undisclosed foreign income and asset = ₹5,50,000.
Tax at 30% = 30% × ₹5,50,000 = ₹1,65,000.

Answer: Tax payable under the Black Money Act is ₹1,65,000, charged on ₹5,50,000. No deduction or loss set-off is allowed.

Example 2

Ravi has the same facts as Meera, but he is resident but not ordinarily resident in India for the tax year 2026-27. He earned ₹5,00,000 from a foreign business, did not disclose it, and holds foreign shares worth ₹5,50,000. A friend says he owes 30% tax under the Black Money Act. Advise Ravi.

Show the solution

Provision: the Black Money Act charges only an assessee who is resident other than not ordinarily resident in the tax year.
Facts: Ravi is RNOR, so he does not meet the residence condition.
Conclusion: no tax arises under the Black Money Act on the foreign income or the shares, whatever the amounts.
Note: the question concerns this Act only. Any Indian-source income, or foreign income controlled from India, is still dealt with under the Income-tax Act, 2025 as per his residential status.

Answer: Ravi's Black Money Act liability is nil because he is RNOR. The friend's claim of 30% tax under this Act is incorrect.

Exam tips

Start every answer with residential status. It earns marks and shows the examiner you know the gatekeeper test.
In case-scenario MCQs, look for the trap: RNOR or non-resident status, or income already disclosed in the return.
Show the double-counting adjustment line explicitly in numerical answers. That is where partial marks are won.
Write the rate as a flat 30% with 'no deduction or set-off' in the same sentence.
Write theory answers in provision, facts, conclusion form, and keep penalty and prosecution for the related procedure topic.

Practice questions from Provisions to Counteract Unethical Tax Practices

Black Money Act: Scope and Charge of Tax in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalBlack Money Act 2015: Scope and Key Definitions

Black Money Act: Scope and Charge of Tax: frequently asked questions

Who is liable to tax under the Black Money Act, 2015?

An assessee who is resident in India, other than not ordinarily resident, in the tax year is liable. Non-residents and RNORs are outside the charge. Within that group, only undisclosed foreign income and assets are taxed.

What is the rate of tax under the Black Money Act?

The rate is a flat 30% on the total undisclosed foreign income and asset of the tax year. There is no basic exemption limit and no deduction or loss set-off is allowed.

What counts as an undisclosed foreign asset?

It is an asset located outside India, including a financial interest in a foreign entity, held by you or for your benefit, that is not properly disclosed or explained. Examples are an undeclared foreign bank account, property or shares.

How is the value of the asset determined?

The asset is taken at its fair market value, computed as per Rule 3 of the Black Money Rules, as on the relevant date prescribed there. In exams, use the value given in the question. Then deduct the income already included that was invested in the asset, so the same amount is not counted twice.

Can the same income be taxed under both the Black Money Act and the Income-tax Act?

No, not the same income or asset. Income chargeable under the Black Money Act is not included in total income under the Income-tax Act. Income that you disclosed in your return is taxed under the Income-tax Act instead.