GST on Video Editing and Similar Digital/Professional Services

 By CA Surekha S Ahuja

As India becomes a global hub for digital, creative, and professional services, professionals supplying video editing, animation, design, software, consulting, and similar services to clients outside India need a precise understanding of GST, export classification, ITC eligibility, domestic advisory charges, and refund mechanisms.

This guidance note integrates legal provisions, CBIC circulars, real-world scenarios, and nuanced advisory for professionals, CAs, and business advisors.

Defining Export of Services under GST

Legal Basis – Section 2(6), IGST Act 2017

A service qualifies as an export only when all five conditions are satisfied:

Condition	Requirement	Analytical Insight
Supplier	Located in India	GST-registered supplier; supply from India
Recipient	Outside India	Must be a distinct legal entity; supply to branch/subsidiary of same entity is not export
Place of Supply	Outside India	Determined under Sec 13(2) IGST; exceptions under Sec 13(3) must be considered
Payment	In convertible foreign currency or RBI-approved INR	Non-compliance converts supply to domestic
Distinct Entities	Supplier and recipient	Ensures separate economic identity; critical for zero-rated supply

Section 13(2) – Default Place of Supply Rule:

“The place of supply of services, except services specified in sub-sections (3) to (13), shall be the location of the recipient of services.”

Exclusions:

• Sec 13(3)(a): Services linked to goods requiring physical presence

• Sec 13(3)(b): Services requiring supplier presence

Circular Reference:

• CBIC Circular 230/24/2024-GST (10.09.2024) confirms that digital and remote professional services exported to foreign clients are zero-rated, even when delivered online.

GST Treatment:

• Zero-rated supply under Sec 16 IGST.

• Full Input Tax Credit (ITC) claimable on inputs and services used for exported services.

• Supplier may either operate under LUT/Bond or pay IGST and claim refund via Form RFD-01.

Critical Compliance Notes:

• Foreign currency receipt is mandatory; proof of inward remittance is essential.

• Recipient must be a distinct legal entity.

• Contracts and invoices should clearly indicate recipient location, currency, and zero-rated supply.

Domestic Advisory/CA Fees Billed to Indian Entities

Scenario: Indian exporter hires a CA or consultant for compliance, structuring, or advisory services.

Analysis:

• Supply is domestic → GST 18% (SAC 9982/9983).

• Refund of GST not allowed.

• ITC may be claimed by the Indian exporter if advisory service is directly used for exported services.

Key Advisory Points:

1. Ensure invoice explicitly mentions GST.

2. Maintain contracts linking advisory work to exported services.

3. Record ITC in ledgers with clear mapping to exported supply.

4. Missing documentation may lead to ITC disallowance on audit.

Differential Table – Export vs Domestic Advisory:

Feature	Exported Service	Domestic Advisory Fee
GST Rate	0%	18%
Refund	Yes (LUT/IGST)	No
ITC	Fully claimable	Claimable if linked to export
Place of Supply	Recipient outside India	India

Platform or Intermediary-Based Supply

Scenario: Services routed via Indian platforms (Fiverr India, Upwork India) or intermediaries.

Analytical Treatment:

• Supplier → Platform (India) → Domestic supply → GST 18%

• Platform → Foreign Client → Export → Zero-rated supply

• ITC of GST paid to domestic supplier is claimable if used for exported service

Key Insights:

• Section 14 IGST (Principal Supply) applies → GST classification follows principal supply rules.

• Proper documentation linking domestic service to exported output is mandatory.

• Multi-layer invoicing requires accurate ITC tracking.

Place of Supply and Classification – Minute Detailing

Scenario	Section	Place of Supply	GST Treatment	Refund / ITC
Video editing / digital service → Foreign client	13(2)	Recipient outside India	Zero-rated	Refund claimable; ITC fully claimable
CA / advisory fees → Indian client	2(6)	India	Domestic 18%	Refund not allowed; ITC claimable if linked to export
Domestic intermediary / platform services	14	India	Domestic 18%	ITC claimable if linked to export
Platform → Foreign client	13(2)	Recipient outside India	Zero-rated	Refund claimable; ITC fully claimable

Professional Insights:

• Export classification hinges on recipient location and distinct legal entity.

• Documentation is key: invoices, contracts, and proof of remittance.

• ITC linkage must be auditable to withstand GST scrutiny.

Process & Documentation – Detailed Steps

1. Invoices:

   • Export: Foreign currency, zero-rated, reference LUT/Bond.

   • Domestic advisory: INR, GST 18%.

2. Contracts:

   • Explicitly identify foreign client, scope, and linkage with domestic advisory.

3. Payment Proof:

   • Foreign inward remittance certificates.

   • Domestic payment proof for CA/advisory fees.

4. LUT / IGST Refund Filing:

   • LUT/Bond for zero-rated supply.

   • Refund claim via Form RFD-01 if IGST is paid.

5. ITC Tracking:

   • Maintain detailed ledgers of GST paid on domestic advisory/input services.

   • Explicit mapping to exported services is mandatory.

Risk Triggers and Compliance Safeguards

• Non-convertible currency → Export classification fails → GST liability arises.

• Recipient not distinct → Reclassified as domestic → Zero-rating denied.

• Misclassification of platform services → Refund denial.

• Missing contracts, invoices, or remittance proof → ITC disallowance.

• Domestic advisory fees without linkage → ITC disallowed.

Professional Advisory:

• Maintain complete documentation, including contracts, invoices, bank remittance, and ITC ledger.

• Verify recipient location, entity status, and currency of receipt.

• Ensure LUT/Bond filing prior to export.

FAQs 

Q1: Are remote video editing or digital services exported?
A: Yes, if all Section 2(6) IGST conditions are met and payment is in foreign currency.

Q2: Can GST on CA/advisory fees billed in India be refunded?
A: No, domestic supply → refund not allowed. ITC may be claimed if linked to exported services.

Q3: Does platform invoicing affect export classification?
A: No, recipient location determines zero-rated treatment (Sec 13(2)).

Q4: Can payment in INR qualify as export?
A: Only if RBI-approved; otherwise, must be convertible foreign currency.

Key Takeaways – Ultimate Analytical Insights

• Exported services → Zero-rated GST; full ITC; foreign currency remittance proof essential.

• Domestic advisory / CA fees → GST 18%; no refund; ITC claimable if linked to exported service.

• Platform/intermediary arrangements → Accurate GST classification and ITC mapping essential.

• Documentation → Contracts, invoices, remittance proof, and ITC ledgers are critical.

• Audit Safeguard → Maintain clear linkage between domestic input and exported service.

Key Differentials / Risk Triggers:

• Currency of payment

• Recipient legal entity

• Place of supply (Sec 13(2)/Sec 14 IGST)

• Documentation & proof of payment

• ITC linkage and audit trail

Conclusion

This guidance note is the ultimate reference for professionals, exporters, CAs, and advisory firms. It provides:

• Law-based classification for exports and domestic advisory

• Detailed ITC and refund eligibility analysis

• Platform and intermediary flows

• Minute compliance steps and risk mitigation

• Audit-ready documentation advisory

It is designed to prevent GST defaults, enable zero-rated exports, and ensure professional compliance with maximum clarity.

India’s Entrepreneurial Decade: Founders, Investors, Advisors, and the Future of Innovation

By CA Surekha S Ahuja

 "India is not entering an entrepreneurial decade—it is already living it."

India’s economic landscape is undergoing a structural transformation. Data from LinkedIn, the Economic Survey 2024–25, MSME Ministry reports, and global consultancies like McKinsey, WEF, and Inc42, all confirm that India is shifting from an employment-driven economy to a creator-driven economy. This is not hype; it is empirical, measurable, and irreversible.

Founders at the Heart of India’s Transformation

Founder Identity Surge

• 104% increase in LinkedIn founder profiles from July 2024 to July 2025.

• Founder-tagged profiles have tripled since 2022, showing identity-level entrepreneurship, not opportunistic side hustles.

Rural-Urban Spread

• Self-employed “own account workers/employers” in rural areas rose from 19% → 31.2%.

• Urban regions: 23.7% → 28.5%.

• Entrepreneurship is no longer metro-centric; it is pan-India.

Sectoral Pioneers

• SaaS: $30B revenue by 2025, 8–9% of global market, 75% exports.

• Fintech: 34% growth in exports in 2025, Razorpay and Cashfree expanding internationally.

• DeepTech & SpaceTech: India is 2nd globally in WEF Tech Pioneers 2025.

Success & Failures

• 11,223 startups shut down in 2025 YTD (30% increase).

• This reflects market maturity, competitive correction, and the evolution of sustainable businesses.

Forecasting Trends

• With continued digitization, SaaS, fintech, e-commerce, and climate-tech are expected to dominate the next 5–10 years.

• Consumerism is rising, digital payments and subscriptions are growing 18–22% annually.

Investors and Advisors: Navigating Complexity

Investors must factor in:

• Multiple revenue streams, offshore entities, and emerging sectors.

• ESG and social impact investments are gaining importance.

Advisors must navigate:

• Regulatory frameworks: FEMA, FDI, IFSCA, Startup India benefits.

• Financial literacy gaps: 58% of self-employed Indians lack structured tax planning.

• Cross-border implications: ESOPs, international exits, and global compliance.

Policy and Advisory Imperative

• Advisors and investors play a critical role in helping founders scale sustainably.

• Early-stage guidance reduces closure risks and accelerates innovation adoption.

Women as Catalysts

While the focus here is founders, investors, and advisors, women remain a transformative force:

• Women-led MSMEs grew from 1 crore → 1.92 crore (2010–2024).

• Female entrepreneurship adds resilience, focus, and a practical approach to business.

• Government schemes like PMEGP have increased women’s participation 43% YoY.

Women-led startups contribute to diverse leadership, inclusive growth, and innovative solutions.

Policy, Government, and Revenue Departments: Handholding vs Hindrance

India’s government has provided strong policy support:

• Startup India Seed Fund: ₹945 crore

• Fund of Funds: ₹10,000 crore

• 3-year tax holiday under Sec 80-IAC: 3,700+ startups approved

The Recommendation:
Revenue departments and policymakers should prioritize handholding, facilitation, and ecosystem-building over procedural policing or self-interest. Startups should be empowered to scale, innovate, and generate long-term employment and GDP growth.

Practical impact:

• Reduced compliance friction → more startups survive early years.

• Easier access to capital and global markets → faster scaling.

• India’s global attractiveness increases → more unicorns and innovation exports.

Infrastructural & Technological Enablers

Digitization and Consumerism:

• Unified government portals (GST, MCA, startup recognition) reduce friction.

• Mobile-first and SaaS tools allow entrepreneurs anywhere to compete globally.

• Increasing consumer awareness drives demand for innovative products and services.

Urban & Rural Infrastructure:

• Improved logistics, e-commerce penetration, and last-mile delivery enable pan-India market access.

• Rural digitization accelerates entrepreneurial participation and financial inclusion.

Global Trends and India’s Competitive Edge

Indian Founders Abroad:

• 109 unicorns founded by Indians outside India vs 67 in India.

• Top countries: USA (95), UK (4), Singapore (3), Germany (2).

Why Global Moves Happen:

• Tax structure differences

• Regulatory clarity and investor preference

• Predictable exits and repatriation

India’s Response:

• GIFT IFSC enables global-first founders with banking, tax, and fund hosting.

• India is gradually becoming attractive for returning founders.

Forecast:

• By 2030, India could host 200+ domestic unicorns with global expansion, adding 150–170 million jobs through women-led and youth-led startups.

The Road Ahead: Opportunities and Emerging Avenues

• DeepTech & SpaceTech: Satellite services, defense tech, AI-powered aerospace.

• ClimateTech & Sustainability: Green energy, electric mobility, carbon management.

• Healthcare & EdTech: Personalized medicine, AI-based learning platforms.

• Consumer Tech: Lifestyle subscriptions, direct-to-consumer brands, digital entertainment.

Key Insight: Entrepreneurship is evolving in response to changing consumer behavior, digitization, and global opportunities. India’s ecosystem is maturing—founders, investors, and advisors need foresight and strategic guidance.

Conclusion: India’s Entrepreneurial Decade Is Here

Every data point—from LinkedIn founder profiles to SaaS unicorns—tells the same story: India is not following global norms; it is rewriting them.

Key Takeaways for Stakeholders:

• Founders: Innovate, scale, and embrace global-first thinking.

• Investors: Support long-term sustainable growth with sectoral foresight.

• Advisors: Navigate complex regulation, guide compliance, and foster financial literacy.

• Policymakers: Handhold, facilitate, and empower startups to create employment and global impact.

India’s entrepreneurial wave is structural, irreversible, and transformative. The next decade will define India as a global epicenter of innovation, creation, and leadership.

"Every founder, investor, and advisor today is shaping the India of tomorrow."

GST Classification and Taxability Framework for Veterinary and Pet-Care Service Providers

A Professional Guidance Note for Clinics, Hospitals, Boarding Facilities, Grooming Centres, Training Providers, Retail Stores, and Integrated Pet-Care Chains

By CA Surekha S Ahuja

Introduction: The GST Challenge in Veterinary Ecosystems

Veterinary service providers today operate in a hybrid ecosystem that includes medical healthcare, grooming, wellness, lodging, training, physiotherapy, behavioural services, retail of pet goods, sale of live animals, and ancillary services. GST classification disputes frequently arise because the legislation provides a blanket exemption only to healthcare, leaving all non-medical activities squarely taxable.

The purpose of this guidance note is to provide a complete, authoritative, and defensible GST framework covering classification, SAC coding, tax rates, boundary identification, documentation, invoicing design, ITC optimisation, and audit risk management. This advisory consolidates the entire legal, practical, and technical landscape applicable in 2025–26.

Statutory Foundation: Healthcare Exemption for Veterinary Services

Under Entry 46 of Notification No. 12/2017 – Central Tax (Rate), “services by a veterinary clinic in relation to health care of animals or birds” are fully exempt from GST.

This exemption is broad but strictly limited to diagnosis, treatment, preventive medical procedures, surgical care, inpatient care, and post-operative services, including any intervention rooted in therapeutic intent.

To fall under the exemption, the service must satisfy three elements:

1. Clinical Assessment – The service should originate from or be supported by a veterinary assessment or documented clinical need.

2. Diagnostic or Therapeutic Purpose – The objective must relate to medical restoration, healing, recovery, or disease prevention.

3. Veterinarian-Led Delivery – The intervention must be either performed or directed by a qualified veterinary professional.

This legal foundation forms the guiding lens for classification throughout this note.

Comprehensive SAC and Taxability Classification

A. Exempt Veterinary Healthcare Services (SAC 9993 Series)

These services fall unequivocally under the exemption when adequately supported by clinical documentation.

Service Type	SAC	GST Rate	Key Requirements
Clinical consultation, physical examination	999311	Exempt	Clinical findings recorded
Diagnostic services (laboratory, imaging, pathology, ultrasound)	999312	Exempt	Diagnostic order and report
Surgeries including implants and anaesthesia	999313	Exempt	Operative notes and implant specifications
Hospitalisation and inpatient care	999321	Exempt	Admission/discharge notes
Post-operative treatment and medical physiotherapy	999391	Exempt	Treatment schedule and vet prescription
Emergency and critical care	999399	Exempt	Emergency assessment

Boundary logic: The presence of clinical documentation is the decisive element.

B. Grooming and Cosmetic Services (SAC 998612 at 18%)

Cosmetic grooming, aesthetic procedures, routine ear cleaning, bathing, hair trimming, styling, and de-shedding are fully taxable.

Tax shift rule:
If the grooming is medically indicated (parasite removal, wound dressing, dermatitis care), supported by vet notes, the service moves to SAC 999312 (Exempt).

C. Boarding, Lodging, and Day-care (SAC 996311 at 18%)

Boarding and lodging services are taxable when they are custodial, hospitality-based, or comfort-oriented.

However, medical boarding—i.e., boarding required post-surgery, during recovery, or as part of a treatment plan—falls under SAC 9993, and is exempt.

D. Behavioural Training, Obedience Schooling, Fitness and Agility Coaching (SAC 999799 at 18%)

These services are fully taxable unless they form part of a prescribed medical rehabilitation plan, in which case the service shifts to 999391 (Exempt).

E. Retail Sale of Goods (HSN-Based Taxability)

Where a veterinary business operates a retail counter or online store, the classification shifts to HSN-based taxation.

Goods Category	HSN	GST Rate
Pet food including wet, dry, treats	2309	18%
Veterinary medicines	3003/3004	5% or 12%
Pet accessories (collars, harnesses, beds, leashes, cages, toys, grooming equipment)	4201/4202/Other relevant HSN	18%
Nutraceuticals and supplements	Relevant HSN	12% or 18%

F. Sale of Live Animals

Type	HSN	Indicative Rate	Notes
Livestock (bovine, ovine, caprine, equine, poultry, fish)	0101–0106	Exempt or 5%	Species-specific
Pets (dogs, cats, ornamental fish, exotic pets)	0106	Typically 18%	Depends on species, breeding nature, notifications
Commercial pet store sales	0106	Usually 18%	Treated as supply of goods

The seller must ensure classification accuracy as misclassification of exotic animals attracts heightened scrutiny.

Classification Framework: Medical vs. Non-Medical Determination

Core Analytical Test: Clinical Documentation Test

A service is exempt only when clinical records support diagnostic or therapeutic intent. In the absence of documentation, the transaction defaults to taxable.

Additional Boundary Tests

• Purpose Test – Is the service medically required or cosmetic?
• Skill Requirement Test – Can a non-veterinarian perform it?
• Outcome Test – Does it restore health or improve appearance?
• Bundling Test – Is it naturally bundled with medical care?

This multi-layered test ensures defensible classification during audits.

Billing Structure: The Five-Invoice Model for Clean Segregation

To avoid composite supply disputes and maintain audit clarity, the following model is recommended:

1. Healthcare Invoice – Exempt; SAC 9993 series

2. Grooming Invoice – Taxable; SAC 998612

3. Training Invoice – Taxable; SAC 999799

4. Boarding Invoice – Taxable; SAC 996311 (unless medical)

5. Retail Invoice – Goods; relevant HSN

6. Sale of Live Animals – Goods; HSN 0106 series

Segregation ensures correct GSTR-1 mapping and prevents misclassification.

ITC Treatment for Mixed Operations

Where a veterinary business supplies both exempt (healthcare) and taxable (grooming, retail, boarding, training) services, ITC must be apportioned under Rules 42 and 43.

A. Monthly Rule 42 Formula

Eligible ITC = Total common ITC × (Taxable turnover ÷ Total turnover)

Example:
• Total revenue: ₹5,00,000
• Taxable revenue: 40 percent
• Eligible proportion of common ITC: 40 percent
• Remaining ITC reversed in GSTR-3B under Table 4(B)(2)

B. Capital Goods (Rule 43)

Capital goods used in both divisions (e.g., ultrasound machine, X-ray equipment) require proportional ITC reversal over 60 months.

Documentation and Compliance Requirements

For exempt healthcare services

• Examination notes
• Diagnostic orders and results
• Surgical and anesthesia records
• Discharge summaries
• Treatment plans
• Evidence of medical necessity for physiotherapy or boarding

For taxable services

• Detailed grooming and boarding registers
• Training logs
• Material consumption registers
• SAC mapping registers
• Clear separation between staff performing medical vs non-medical tasks

Return and Reconciliation Requirements

• Monthly reconciliation between GSTR-1, GSTR-3B, books, and e-invoices
• Turnover bifurcation ledger
• Exempt and taxable summary sheets
• Annual return mapping

Recommended Business Organisation Model

A two-division model offers the highest compliance efficiency.

Division A: Veterinary Healthcare (Exempt)

Purely therapeutic operations. No ITC claim.

Division B: Wellness, Grooming, Training, Boarding, Retail (Taxable)

Attracts 18 percent GST and offers full ITC credit.

Benefits:
• Zero risk of exemption disputes
• Optimised ITC
• Simplified accounting
• Clear business segmentation
• Strong audit defensibility

Quick Reference Summary Table

Category	SAC/HSN	GST Rate	Classification Principle
Veterinary healthcare	9993 series	Exempt	Clinical documentation required
Grooming	998612	18%	Cosmetic unless medically prescribed
Boarding	996311	18%	Medical boarding exempt
Training	999799	18%	Rehabilitation therapy exempt
Retail	Relevant HSN	5–18%	Goods classification
Live animals	0101–0106	Exempt–18%	Species-specific

Conclusion

The veterinary sector sits at the intersection of exempt healthcare and taxable wellness services, making accurate GST classification essential for risk mitigation, pricing strategy, and operational efficiency. This guidance note provides a complete framework that integrates statutory interpretation, SAC classification, ITC rules, practical billing methodology, and documentation discipline into a single, comprehensive compliance model.

Veterinary service providers that implement the layered classification tests, maintain disciplined documentation, and adopt the five-invoice structure can operate with confidence, reduced audit exposure, and optimal tax efficiency.

Foreign Asset Disclosure in ITR – AY 2025–26

Professional Compliance, Risk Analysis, and Practical Guidance
By CA Surekha S Ahuja

Introduction: The Compliance Imperative

In today’s interconnected financial world, foreign assets are fully traceable. India participates in CRS and FATCA, enabling the Income Tax Department to receive verified data from hundreds of jurisdictions.

For AY 2025–26, the Department has identified high-risk cases where foreign assets are not reported in ITRs. SMS and email alerts have been sent to taxpayers, who now have until 31 December 2025 to revise returns or face penalties.

This note provides a comprehensive professional guide, covering law, intent, enforcement, penalties, risks, and procedural solutions, including revised ITR for AY 2025–26 and ITR-U for earlier years.

Legal Framework: Statutory Obligations

• Income-tax Act, 1961

  • Section 139(1): Requires all ROR taxpayers to disclose all foreign assets in Schedule FA.

  • Section 149: Reopening of assessments for foreign matters up to 16 years.

  • Rule 12 & ITR Forms: Specify reporting format and timeline.

• Black Money (Undisclosed Foreign Income & Assets) Act, 2015 (BMA)

  • Tax: 30% of asset value

  • Penalty: 90% of asset value

  • Prosecution: Up to 10 years

  • Applies even to historic assets or if foreign tax has been paid.

• CRS & FATCA Data Exchange

  • Annual sharing of bank accounts, investments, pensions, insurance, trusts, and entities.

  • Automatic cross-verification with ITR filings.

  • Non-disclosure flags high-risk cases.

Key Principle: Any foreign asset over which the taxpayer has ownership, control, or beneficial interest must be disclosed.

Legislative Intent: Purpose Behind Disclosure

1. Prevent Offshore Tax Evasion: Identify undisclosed accounts, layered investments, and untaxed foreign income.

2. Encourage Voluntary Compliance: Early correction reduces penalties and prosecution risk.

3. Align with Global Norms: CRS and FATCA obligations require domestic transparency.

Scope of Schedule FA: What to Disclose

• Bank Accounts: Active, dormant, joint, inherited, closed

• Investments: Foreign equities, bonds, mutual funds, ETFs, RSUs/ESOPs

• Insurance & Retirement Funds: 401(k), IRA, superannuation, foreign pensions

• Business/Entity Interests: Foreign companies, partnerships, trusts (all roles)

• Property Abroad: Residential, commercial, direct, or indirect

• Digital/Crypto Assets: Foreign wallets, exchanges

• Other Rights: Royalties, IP income, nominee accounts

Rule of Thumb: If the asset exists outside India and provides financial benefit, it must be disclosed.

Current Enforcement: AY 2025–26 Posture

• High-Risk Identification: AI-driven matching of foreign asset data vs. Schedule FA.

• SMS/Email Nudges: Alert taxpayers to revise ITRs by 31 December 2025.

• Past Year Performance: 24,678 taxpayers revised returns, disclosing ₹29,208 crore in assets and ₹1,089.88 crore in foreign-source income.

• Frequently Affected Groups: Senior citizens, retired NRIs, parents with joint accounts, RSU/ESOP holders.

Voluntary revision now avoids presumptions of concealment.

Consequences of Non-Disclosure

Income-tax Act

• Reopening under Section 149

• Penalty under Section 270A (200% of under-reported tax)

• Prosecution under Sections 276C/277

Black Money Act

• Tax: 30% of asset value

• Penalty: 90% of asset value

• Combined: 120% of asset value

• Prosecution: Up to 10 years

• Confiscation possible

Additional Risks: PAN flagged high-risk, restricted remittances, FEMA scrutiny, loss of treaty benefits, reputational and financial risk.

Procedural Solutions: Corrective Measures

1. Audit All Foreign Assets: Bank accounts, ESOPs, pensions, trusts, property.

2. Reconcile with Schedule FA: Confirm balances, ownership, and foreign-source income.

3. File Revised or Updated ITR:

   • AY 2025–26: File a revised ITR before 31 December 2025.

   • Earlier two years: Use ITR-U (Updated ITR) to report previously undisclosed foreign assets.

4. Maintain Documentation: Bank statements, acquisition proofs, foreign taxes paid, valuations.

5. Respond Promptly to Notices: Address SMS/email alerts professionally.

6. Seek Expert Guidance: Complex assets like trusts, RSUs, crypto, and cross-border investments require professional interpretation.

Foreign Asset Disclosure Checklist

• ✔ Bank accounts (active, dormant, joint, closed)

• ✔ Brokerage/custodial accounts, RSUs/ESOPs

• ✔ Foreign shares, ETFs, bonds

• ✔ Overseas property (residential/commercial)

• ✔ Foreign entities, trusts, partnerships

• ✔ Insurance and retirement funds

• ✔ Crypto or digital assets abroad

• ✔ Foreign royalties, IP income, nominee accounts

Guiding Principle: When in doubt, disclose it.

Conclusion: Transparency as Protection

Foreign asset disclosure is no longer a formality—it is financial self-protection.

Proactive, accurate, and well-documented disclosure ensures compliance, preserves legacy, and mitigates severe penalties.

“What you voluntarily disclose today will always cost less than what the system discovers tomorrow.”

For AY 2025–26, revision and professional documentation are critical, while earlier years can be regularized using ITR-U, ensuring full compliance and minimizing enforcement risk.

Black Money Act: Procedural Safeguards, Defence Walls, and Protecting Honest Taxpayers Across Scenarios

A Professional and Authoritative Guide for Deceased Assessees, Legal Heirs, Seniors, and NRIs

By CA Surekha S. Ahuja

Introduction — When the Law Protects the Innocent

The Black Money (Undisclosed Foreign Income and Assets) Act, 2015 (BMA) is India’s most stringent fiscal law. Penalties are severe, including tax and equal penalties, with potential prosecution exposure.

Yet, the law is procedural at its core. Every misstep by authorities — issuing rash SCNs, ignoring replies, failing approvals, or relying on assumptions — can invalidate penalties.

This guide addresses all eventualities where taxpayers are affected:

• Orders issued rashly or mechanically

• Posthumous penalties

• Impact on legal heirs

• Senior citizens or citizens with prior full tax compliance

• NRIs with overseas income/assets

• Prior search or ITAT assessments with clean findings

Key Truth: If the department misapplies the law, how can any honest citizen — young, old, educated, uneducated, resident, or NRI — rest peacefully, having paid full taxes in their lifetime?

This post equips readers with procedural weapons, defence walls, and winning strategies.

Rash or Mechanical SCNs — The Achilles Heel

A majority of BMA penalties fail because SCNs:

• Do not acknowledge submitted replies

• Ignore prior search or ITAT assessments

• Assume ownership or benefit mechanically

• Impose deadlines without statutory justification

Legal Foundation:

• SC – Mohinder Singh Gill: natural justice requires meaningful reply consideration

• Delhi HC – Sabh Infrastructure: mechanical orders without reasoning = null and void

Winning Strategy:

• Document all replies submitted

• Point out non-application of mind

• Emphasize absence of specific evidence

Deceased Assessees — Law Shields the Dead

Orders issued posthumously violate natural justice:

• SCN to deceased = void ab initio

• Legal heirs cannot be penalized without proof of benefit or control

• Prior search-based assessments (AYs 2005-06 to 2015-16) with no adverse finding are binding

Procedure:

• Submit death certificate & succession proof

• Attach prior ITAT or search assessment orders

• Demonstrate absence of beneficial ownership or inflow to heirs

Outcome: Departments issuing posthumous SCNs risk complete nullification of penalties, and courts consistently protect estates.

Legal Heirs — Protecting Innocent Parties

Legal heirs are sometimes implicated without evidence of actual benefit.

• Liability arises only if heirs funded, controlled, or benefited

• Mere inheritance or nominee designation is insufficient

Strategy:

• Affidavits from heirs confirming no benefit received

• Map fund flows and corporate records

• Forensic CA certificates tracing funds and ownership

Verdict Trend: Courts have repeatedly held heirs cannot be penalized for inherited assets or unearned benefits, unless deliberately misused.

Senior Citizens, Law-Abiding Taxpayers, and NRIs

Many honest taxpayers — including seniors, residents, and NRIs — have:

• Paid all taxes fully

• Disclosed income transparently

• Submitted IT returns for decades

Reality: They may still receive rash SCNs alleging foreign assets.

Legal Protection:

• Section 46 & 47 BMA — SCN must provide reason, evidence, hearing, and be time-bound

• Prior assessments (ITAT, search) are binding unless fresh evidence emerges

• Natural justice applies equally to all, irrespective of age, status, or NRI status

A Practical Reality: Many taxpayers save money to ensure their children, settled abroad, can live with dignity or pursue opportunities outside India. They pay full taxes but face harassment from mechanical BMA orders. Children, seeing parents’ age, illness, and tension, often do not wish to return to India, fearing repeated scrutiny.

Policy Insight: The BMA was intended for undisclosed income of corrupt officers, politicians, or powerful individuals, not honest citizens. Punitive action should target procedural lapses by officers, not taxpayers who have lived and complied by the law. “Jiska khaya, usko maro” should never guide law enforcement. Courts increasingly recognize that procedure, evidence, and fairness protect compliant taxpayers from arbitrary action.

Prior Search Assessments — Finality Defence

• ITAT and search-based assessments are final unless fresh evidence exists

• Mechanical reopening of concluded cases = invalid (CIT vs Reliance Industries, SC – Sahara India)

Strategy:

• Attach prior orders as primary evidence

• Emphasize compliance and absence of undisclosed assets

• Challenge posthumous or heir-targeted SCNs as assumption-based

Beneficial Ownership — The Indestructible 10-Layer Defence Wall

Even complex corporate/fund allegations fail when taxpayers produce a comprehensive ownership defence:

1. Domestic & foreign fund-flow trail

2. Foreign bank statements proving credit source

3. Deceased/assessee ITRs + Schedule FA

4. Corporate ownership/trust documents

5. POA or nomination letters

6. Loan/dividend agreements, if applicable

7. Affidavits confirming source of funding

8. Affidavits by heirs confirming no benefit received

9. Evidence of no inflows/dividends

10. Forensic CA certificate mapping all flows

Impact: AO assumptions collapse. Penalties rarely survive this defence.

Limitation and Mandatory Approvals — Jurisdictional Shields

• Section 47 BMA: Penalty must be passed within one year of end of FY of SCN issuance

• Mandatory approvals: JCIT/ACIT depending on case

Strategy:

• Highlight any delay or missing approvals in appeals

• Use as procedural weapon, often neutralizing the penalty before facts are even argued

Evidence and Natural Justice — Core Anchors

• AO must provide all evidence relied upon (CRS, bank statements, audit trails)

• Failure = breach of natural justice → penalty void

• SCs and HCs have repeatedly emphasized speaking orders and reasoning

Strategy: Demand disclosure formally and attach ignored replies in appeal

Departmental Failures — When Law Is Ignored

The department may issue SCNs or orders despite:

• Prior ITAT/search assessments showing no adverse findings

• Deceased or senior citizens being unable to respond

• Legal heirs having no beneficial ownership

• NRIs already compliant under foreign tax regimes

Human and Policy Perspective: Honest taxpayers — including NRIs and heirs — often refrain from returning to India due to harassment and repeated scrutiny, even when assets and income are fully declared. The system, if misapplied, discourages voluntary compliance and lawful savings, forces stress, and may separate families. Courts favor procedure, evidence, and natural justice, ensuring taxpayers are not penalized for officers’ overreach or ignorance of law.

Practical Justice: Those who have lived and paid their taxes fully should not face punitive action. Law should target actual wrongdoers — politicians, government officers, or persons concealing assets, not compliant seniors, NRIs, or heirs. “Jiska khaya, usko maro” has no place in law.

Strategic Steps — Your Stepwise Defence

1. Track timeline: SCN, replies, orders, deadlines

2. Gather documentation: ITAT/search orders, death/succession certificates, fund flows

3. Review procedural compliance: Section 46 & 47, approvals, hearing, limitation

4. Apply the 10-layer beneficial ownership defence

5. Prepare formal appeal: NFAC or writ petition highlighting procedural and jurisdictional defects

6. Engage professional representation for technical evidence and fund tracing

Conclusion — Procedure, Evidence, and Jurisprudence Are Your Arsenal

The Black Money Act is draconian, but it is procedural to its core.

• Rash SCNs, posthumous notices, or mechanical penalties are prime candidates for appeal

• Deceased persons and legal heirs are protected under natural justice

• Senior citizens, law-abiding taxpayers, and NRIs cannot be penalized for lawful disclosure

• Prior search/ITAT assessments create a legal fortress

• Comprehensive beneficial ownership mapping, affidavits, and procedural compliance crush AO assumptions

Verdict Pattern: Courts consistently strike down orders where:

• Procedure is ignored

• Replies are not considered

• Beneficial ownership is incorrectly assumed

• Prior clean assessments exist

Key Takeaway: Procedure, law, and evidence are your strongest weapons — ensuring peace of mind for taxpayers, heirs, and deceased estates, no matter how harshly or rashly a BMA order is issued.

Policy Note: The BMA should target actual tax evaders — officers or politicians hiding income, not law-abiding taxpayers who “have eaten according to law” and wish to live peacefully with family. Arbitrary enforcement disrupts lives, causes tension, and may separate families unnecessarily. Courts and procedural safeguards exist to protect the innocent and compliant.