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Black Money Bill: Any non-disclosed income or asset outside India will attract 90% penalty

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By Harshmeet Singh

Moving forward on its long standing commitment of bringing back the illicit Indian money concealed abroad, the Modi Government, on Friday, finally tabled a bill in the Lok Sabha which would cover such offences. Called the ‘The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015’, it would come into effect (if passed by the Parliament) beginning from 1st April, 2016.

The official statement before the introduction of the Bill said “In order to fulfil the commitment made by the Government to the people of India through the Parliament, the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 has been introduced in the Parliament on 20.03.2015.  The Bill provides for separate taxation of any undisclosed income in relation to foreign income and assets. Such income will henceforth not be taxed under the Income-tax Act but under the stringent provisions of the proposed new legislation,”

Major provisions of the Bill

The Bill includes the following penalties to be levied upon Black money holders –

Any non-disclosed income or asset outside India would attract a penalty tax, which would be thrice the normal tax slab of 30%, making it 90%. Significantly, this penalty would be over and above the normal tax payable at 30%.

  • If the individual doesn’t furnish returns on his / her foreign income or asset (even if there is no taxable income), it would result in a penalty of Rs 10 lakh. However, undisclosed foreign accounts worth less than Rs 5 lakh won’t attract any penalty.
  • Apart from the hefty fines, the wilful offenders of tax evasion would also be slapped with a rigorous imprisonment for a period of 3 to 10 years.
  • If the person fails to furnish returns on the foreign assets and income held by him / her (even if there is no taxable income), it would attract a rigorous imprisonment for a period ranging from 6 months to 7 years.
  • Aiding or enticing in filing a false return or incorrect declaration would also result into a rigorous imprisonment for a period ranging from 6 months to 7 years. This clause is also applicable to the financial intermediaries and Banks who assist in such secrecy. The beneficial owners of the asset would also come under the purview of this provision.

Safeguards in the Bill

Following the principles of natural justice, as mentioned in our constitution, the proposed bill contains multiple provisions for ensuring that the accused gets enough chances to prove his / her innocence. The bill calls for obligatory issue of notices to the accused, a fair chance of being heard, providing orders in writing, acceptance of the evidence brought forth by him to prove his stand and much more. Furthermore, the accused would also have the right to appeal to the ‘Income tax appellate tribunal’, the concerned High Court and the Supreme Court, if needed.

To encourage voluntary disclosure, the bill also provides for a one time reprieve to all those who would be willing to voluntarily disclose their illicit money or assets stashed abroad. This provision is applicable only for a limited period wherein the person must disclose his / her foreign asset and file a declaration to the concerned tax authority by paying the legitimate tax and the penalty. Notably, this isn’t a pardoning clause since the person would still be slapped with the penalty in proportion to the undisclosed assets. However, the persons making voluntary disclosures won’t be prosecuted under the harsh provisions introduced in the Bill.

The bill also seeks to amend the Prevention of Money Laundering Act (PMLA) and bring ‘concealment of income and evasion of tax in relation to a foreign asset’ under its purview as a ‘predicate offence’. This move would empower the enforcement agencies to impound the foreign assets in question and begin its proceedings. The date of opening of the foreign account has also been made a mandatory disclosure under the proposed bill.

 

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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)