Key Highlights of the CBDT Instruction
1. What Changed?
The CBDT has amended its own instruction (originally issued on March 15, 2022) to align with the statutory changes made by the Finance (No. 2) Act, 2024. The update specifies that prosecution under Sections 49 and/or 50 of the Black Money Act will not be initiated if a penalty under Sections 42 and/or 43 is neither imposed nor applicable. This protection now extends to foreign assets (excluding immovable property) whose aggregate value does not exceed ₹20 lakh during the relevant previous year.
2. Why ₹20 Lakh Threshold?
Earlier, the relief—both from penalty and prosecution—for small undisclosed foreign assets was limited to bank accounts with balances up to ₹5 lakh, per the 2022 instruction. The Finance (No. 2) Act, 2024 expanded this threshold to ₹20 lakh for all types of foreign assets (excluding immovable property), effective from October 1, 2024. The updated CBDT instruction now brings prosecution policy in line with the amended penalty threshold.
3. Effective Date
This instruction takes effect retroactively from October 1, 2024, which is when the statutory amendment (Finance (No. 2) Act, 2024) came into force.
Implications & Purpose
1. Who Benefits?
Taxpayers who unintentionally failed to disclose foreign movable assets—such as bank accounts, investments, or other financial interests—where the total value did not exceed ₹20 lakh in a year, are now shielded from both penalty (under Sections 42/43) and prosecution (under Sections 49/50). This relieves individuals from harsh penal consequences for minor or inadvertent non-disclosures.
2. Intention and Rationale
- The CBDT’s move reflects administrative fairness by prioritizing enforcement against serious or deliberate offenders, rather than penalizing genuine, minor oversights.
- It eliminates discrepancies between the law (the statutory ₹20 lakh threshold) and departmental guidance (previously stuck at ₹5 lakh), offering consistent treatment to taxpayers.
3. No Change to Law—Only to Enforcement
It’s important to note that this is an internal administrative instruction and not a legal amendment to the Act itself. There has been no formal legislative change to the prosecution provisions in the Black Money Act via the Finance Act, 2024 or otherwise. The CBDT is simply aligning enforcement practices with existing legal thresholds and providing clarity.
Quick Summary Table
| Aspect | Details |
|---|---|
| Instruction Date | August 18, 2025 (Instruction No. 285/46/2021-IT(Inv.V)/88) |
| Previous Threshold | ₹5 lakh (for bank accounts) under March 2022 instruction |
| Updated Threshold | ₹20 lakh (all movable foreign assets, excl. immovable property) |
| Applies To | Cases where penalty under Sections 42/43 is not imposed or is not applicable |
| Effect On Prosecution | No initiation of prosecution under Sections 49/50 for covered cases |
| Effective Retroactively | From October 1, 2024, the effective date of enforcement change in law |
| Legislative Status | Internal CBDT instruction only; no change in statutory prosecution provisions |
In Summary
- The CBDT’s August 18, 2025 instruction ensures that if the penalty under Sections 42 and/or 43 of the Black Money Act is not imposed or not applicable, then prosecution under Sections 49 and/or 50 will not be initiated, provided the aggregate value of relevant foreign assets (excluding immovable property) does not exceed ₹20 lakh during the year.
- This aligns enforcement with the statutory amendment effective from October 1, 2024, enhancing fairness and clarity in tax administration.