As people’s privations due to the November 8 withdrawal of specified series of banknotes that then accounted for 86% of the currency in circulation remained largely unabated even after a fortnight, the Lok Sabha on Tuesday passed, amid din and without any discussion, a Bill that seeks to tax the unaccounted money deposited in banks under a new fixed-tenure Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016. While the total tax in case such unaccounted asset is declared now will be only 50%, a benign rate considering what concealed income would have otherwise attracted under the extant law, the opposition parties failed to highlight this virtual amnesty given to tax cheats. They even refused to take the government’s offer for a debate before the Bill was put to a voice vote.
The Taxation Laws (2nd Amendment) Bill, 2016, as reported earlier, proposes to levy a 30% tax, a 10% penalty and a surcharge called Pradhan Mantri Garib Kalyan cess, which will be 10% (33% of the tax). The proposed law also makes it obligatory on black money declarants to deposit 25% of the disclosed amount in a scheme to be notified by the Reserve Bank of India without interest and bound by a four-year lock-in clause. The total tax could be 85% (60% tax plus 15% surcharge plus 10% penalty) in case undeclared income under PMGKY is misreported and taxman finds that out.
With the Lower House passing the Bill, which seeks to amend the I-T Act and Finance Act, 2016, it is certain that it would become law. The Rajya Sabha has a window to propose amendments to the Bill in 14 days and if it fails to do so, the Lok Sabha’s decision will prevail.
Seeking to break opposition unity on demonetisation, the government on Monday formed a panel of chief ministers headed by Andhra Pradesh’s N Chandrababu Naidu to
suggest measures to minimise the inconvenience to the people due to demonetisation. The panel’s first meeting would be held on December 2. Chief ministers of some of the opposition rules states are members of the panel, including Bihar’s Nitish Kumar and Tripura’s Manik Sarkar.
Even as opposition members indulged in fierce slogan shouting, finance minister Arun Jaitley said the Bill would give means to the government to run schemes like the poverty alleviation scheme Garib Kalyan Kosh. He said the Bill was brought after it came to the government’s notice that some people were trying to convert their unaccounted cash through illegal means. There have been reports of the no-frills Jan Dhan accounts being rampantly misused to park black money.
Lok Sabha speaker Sumitra Mahajan said since the Bill was of urgent public importance, it had to be passed immediately. Though she wanted a debate, she said “it is impossible” because of the behaviour of the opposition members.
While the Congress was disrupting the House, some opposition parties favoured a debate on the Bill with repercussions on the income tax laws.
“We should need to find ways to resolve this deadlock and discuss two critical issues (the Bill and demonetisation issue),” Biju Janata Dal leader B Mahtab said.
Earlier, several opposition members said the Bill could not be discussed before the debate on demonetisation.
Congress leader in the Lok Sabha Mallikarjun Kharge and the Trinamool Congress’ Sudip Bandhopadhyay said the adjournment motion on demonetisation and the Bill could be discussed together as the issues were similar. Saugat Roy of the Trinamool Congress said that since Jaitley had introduced the Bill “surreptitiously” and “stealthily” amid din on Monday, the opposition did not get a chance to oppose its introduction as per rules.
Separately, Prime Minister Narendra Modi on Tuesday asked all MPs and MLAs of the Bharatiya Janata Party (BJP) to give details of their bank transactions between November 8 and December 31 to party president Amit Shah. Modi also hailed the people for the BJP’s recent electoral wins, saying that people wanted all-round progress and won’t tolerate corruption and misgovernance. “Be it the Northeast, West Bengal, Madhya Pradesh, Maharashtra, Gujarat… BJP has performed very well. I thank the people,” Modi tweeted. BJP won local polls in Maharashtra on Monday and in Gujarat on Tuesday.
Meanwhile, tax experts said the Lok Sabha passing the Bill removed the ambiguity over taxation of demonetisation deposits. Rahul Garg, leader, direct tax, PwC, said: “Clearly, penalties now provided for declaration of unaccounted and unexplained asset is much less than 200% or 300% of taxes provided hitherto.
If the revenue (department) had unearthed this in the past years, not only the penalty collected would have been higher but also acted as greater deterrent for keeping unaccounted assets. It is important that in this round, a serious effort is made to bring to book all such assets that are not voluntarily declared by the holders, without causing harassment to honest taxpayers.”
Sudhakar Sethuraman, partner, Deloitte Haskins & Sells, said: “The government has hit multiple targets with a single bullet with this amendment. It encourages people to come clean, infuses funds into the formal economy, increases revenue, channels funds for welfare and serves a stern warning for non-compliance. With the heightened monitoring of transactions, it is possible for the taxman to catch evaders and impose heavy penalty.”