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Is the Black Money Issue Getting Tackled?
Mon, 4 Jul Pre-Open

Recently, Revenue Secretary Mr Adhia stated that there are only 0.15 million individuals whose total income would be above Rs 5 million. This means, in a country of close to 1.25 bn people, only 0.012% of the population has an income of over Rs 5 million. But this number is way behind than the government's estimates.

Mr Jaitley, tried to address this issue in the Union Budget 2016. He proposed a limited period Compliance Window for domestic taxpayers to declare undisclosed income by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, This adds up to payment of around 45% to government for the undisclosed income.

So, if one has black money, and is willing to pay 15% extra to the government, over and above the top tax rate, the laws of the land won't apply on such a person. Meaning, there will be no scrutiny or enquiry regarding the income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution. The compliance window is from 1 June to 30 September 2016. Looking at the lower penalty provisions, there is a high probability that a considerable chunk of black money lands in the hands of the government.

However, previous efforts by the government to recover black money from undisclosed foreign assets had failed miserably. In May 2015, the Parliament had passed the Undisclosed Foreign Income and Assets (Imposition of New Tax) Act.

This window allowed those with undisclosed foreign assets and income (or foreign black money) to declare them and pay a tax of 30% and a penalty of 30%. The window was closed on 30 September 2015.

Taking advantage of this compliance window, only 638 declarants confirmed assets and income of Rs 41.5 billion was collected in total. The money recovered was not even enough to buy a scoop of ice-cream for every Indian as compared to the claims of buying everyone a new car. Maybe, the scheme failed on the back of high penal provisions of 30% over and above the normal tax rate.

Having said that, Switzerland has begun sharing foreign client details on evidence of wrongdoings. Further, it has agreed to expand its cooperation on India's fight against black money and expects to sign a new pact for automatic information exchange 2018 onwards. Further, a team of Indian officials too are expected to visit Switzerland soon to expedite the pending information requests about suspected illicit accounts of Indians in Swiss banks.

Moreover, money held by Indians in Swiss banks has nearly fallen by one-third to a record low of Rs 83.9 billion at the end of 2015. This figure authenticates that there has been a considerable success to bring back black money from the Swiss banks. Recently, the taxmen have detected Rs 81.8 billion of undisclosed income against those whose names figured in the HSBC Geneva list. Out of the total 628 cases under this list, the department got "actionable" evidence in 415 cases. Hence, lately there has been a positive development on the black money issue.

The recently introduced scheme in the Union Budget coupled with increased sharing of wrongdoings from the Swiss authorities will help to bring a clampdown on the black money issue which has been one of the prime focus of the Modi government.

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