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Black money: disclosure to get immunity under FEMA, PMLA

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ArunJaitley

 

New Delhi: The government on Monday said immunity from prosecution would be given under specific laws to those declaring undisclosed foreign assets under the compliance window of the new Black Money (Undisclosed Foreign Income and Assets) Act.

Releasing a list of frequently asked questions (FAQs), the finance ministry said disclosures made under the said Act would have “immunity from prosecution under the Foreign Exchange Management Act (FEMA), Prevention of Money Laundering Act (PMLA), Income Tax Act, Wealth Tax Act, Companies Act and Customs Act”.

It, however, does not provide immunity from prosecution under any other statute.

Illustrating with an example, the ministry said that if the undisclosed asset has been acquired out of the proceeds of sale of protected animals, the person will not be eligible for immunity under the Wildlife (Protection) Act.

The offence of willful attempt to evade tax will also not be an offence under the PMLA, the FAQs said.

The one-time 90-day compliance window granted to foreign asset holders to make a declaration, however, does not guarantee immunity for wealth generated from corruption, it added.

On the compliance rule that bars persons against whom the government has prior information, the FAQs said declarations by such persons will be dealt under the Income Tax Act and not under the black money law that came into force last week.

This concession will be available only to those who have not received any intimation from the tax department having prior information about their foreign assets.

Persons making declarations will be intimated on whether the government has any prior information by October 31, a month after the end of the 90-day compliance window on September 30.

The ministry last week notified September 30 as the expiry date of the compliance window, while allowing those with undisclosed income and assets abroad time till December 31 to pay the levies.

“Hence, while people will have three months to declare their undeclared assets, they will have another three months to pay the penalties and taxes on the said assets,” a finance ministry press release said here.

The government last week also notified rules for calculating income and assets abroad under the Black Money Act.

The value of the overseas assets, including immovable property, jewellery and precious stones, archaeological collections and paintings, shares and securities and shares in unlisted firms abroad will be calculated at the fair market value, the Central Board of Direct Taxes (CBDT) said in a notification here.

The value of an overseas bank account will be the sum of all deposits made in the account since its opening, the CBDT said.

The Black Money Act, for the first time, allows levy of tax in India on assets kept abroad.

Unlawful, undisclosed income abroad has been taxed under this law at the rate of 30 percent with an additional 30 percent penalty.

The law provides for a compliance window for declaring and paying penalty. Failure to meet the compliance timeline will attract an additional penalty of 90 percent for a total tax liability of 120 percent on the quantum of black money stashed abroad.

Admitting that there was no official estimation on black money within India or stashed abroad, Finance Minister Arun Jaitley told parliament during its last budget session that the government was examining the reports of three institutes on the matter.

An unofficial estimate of illegal money stashed overseas puts it somewhere between $466 billion and $1.4 trillion.

(IANS)

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Political Climate Accused Of Encouraging The Promotion Of Black Money

There is a third reason why people who are tracking black money should not be looking at Swiss Banks

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Political Climate Accused Of Encouraging The Promotion Of Black Money. Pixabay

Last week, the political climate was charged with accusations that the government had actually begun encouraging the promotion of black money. Prima facie, the charges seemed to have some merit in them. Swiss bank deposits from India had swelled by 50%, one of the largest increases in recent times. But the accusation was a bit uncharitable. For three specific reasons.

First, even though the percentages seem high, the total amounts involved in Indian deposits with Swiss banks are not. At CHF 1.02 billion – even after accounting for the 50% jump – the amount is significantly lower than the CHF 6.46 billion in 2006 when the UPA was in power. In fact, Indian deposits with Swiss banks had been declining for the past three years – right from 2014 when Prime Minister Modi formed his government. It was only last year that the trend was broken and Swiss deposits began climbing again.

The second reason was that Indian deposits with Swiss banks account for just 0.07% of global deposits with Swiss Banks. That is one of the lowest levels ever during the last decade, overshadowed by an even lower share of 0.05% in 2017. At such percentages, India’s deposits with Swiss Banks are not much to rant and rail about.

There is a third reason why people who are tracking black money should not be looking at Swiss Banks. True, they were the best shelter for clandestine money in the past. But Switzerland has entered into several bilateral treaties for making disclosures about bank deposits to requesting states. That includes a treaty with India to provide real-time information with regard to Indians from January 2019. Obviously, any Indian who wants to stash away black money will not do so with Swiss Banks, because he would stand exposed.

There could, thus, be one credible explanation for the quantum of deposits in Swiss Banks going up. It could be found in the government’s decision to ram through amendments to the Foreign Corrupt Practices Act (FCRA) in March this year.

which seeks to exempt political parties from disclosing their source of funds from overseas. The courts had earlier demanded that political parties make these disclosures and the government thought it wiser to try and change the law instead. This move is now being challenged before the Supreme Court as being unconstitutional by public spirited persons like EAS Sarma. The decision of the court is still awaited. The amendment to the FCRA technically permits politically connected parties to put their money back with Swiss  Banks where it is safer than in tax havens with not-so-unblemished a banking record. If this explanation is correct, one could say that the government, in collusion with all other political parties (all have kept quiet about these amendments), are responsible for the spurt in Swiss deposits.

cartoon showing black money
Cartoon Showing Black money. Flickr

As mentioned in these columns earlier, if people want to look for black money, they should first demand a full fledged investigation into the agriculture income disclosures before the tax authorities during 2011 and 2012. What makes those disclosures horrifying is (a) they were larger than ever before; (b) the cumulative value of disclosures during the two years was a mind-boggling Rs 874 lakh crore (Rs 874 trillion); (c) the cumulative value  of disclosures was eight times India’s GVA for 2013, and almost 100 times the total tax collected in that year.

It can be found in the decision of the enforcement authorities of not auctioning off properties they have seized in the past – irrespective of whether they relate to the NSEL Scam or the politicians who are being investigated for corruption (on extremely narrow charges). Attachment of properties makes for big news, full of sound and fury. But the refusal to auction them off points to collusion.

It can be found in the files of scores of senior officials who were suspended, when fraud was discovered, and then reinstated when public memory died. It can also be found in the files that routinely get burnt in fires that take place at government offices – possibly aimed at making evidence disappear – especially when it comes to corrupt deals and land development scams.

Also read: Punjab’s Aam Aadmi Party and Its Political Self Goals

But these are things politicians do not like to talk about. Many of them are collusive partners in the generation of black money. Their silence in permitting the amendments to the FCRA is ample proof of their willingness to allow a cover-up. The rantings and ravings against Swiss Banks are, therefore, of no consequence. (IANS)