Given that a recent study commissioned by the finance ministry for estimating black money calculated that it could be anywhere between 40-70% of GDP (it includes both domestic and the foreign portion), the compliance window opened by the income tax department for disclosing unaccounted income stashed abroad by the Indians should be seen as the biggest move to unearth ill-gotten wealth.
But going by the mood in the department, there is not much of a hope that the results will be different from the past. The general impression is: “Nobody can estimate how much will be disclosed. The scope is very limited. It is not an amnesty scheme. Those disclosing their black money portion will have to pay 30% tax and same amount of penalty. It may be a success, but there are also chances that it may be a total failure”.
Those who have worked on black money estimation study point out that the government had been advised not to come out with any amnesty scheme or compliance window and should act on credible information for unearthing unaccounted income. Their point is the current scheme neither has any big concession nor is there any big deterrence — so, why should people come and take chances.
Even the VDIS scheme of 1997, which had no penalty, could get less than Rs 10,000 crore as tax at the expense of demoralizing those who pay their taxes honestly. If the earlier five schemes prior to this compliance window, which were quite liberal, didn’t yield much, why would people not think that at some point of time in the future, there would be a seventh chance also.
Just because missing this opportunity (if it is seen as one) would mean paying 30% tax and a 90% penalty with prosecution in the event of getting caught after April1, 2016, people are not going to take the risk considering the poor track record of the Indian investigating agencies in dealing with cases which require coordination of other countries.
The Central Board of Direct Taxes (CBDT) has also not clarified as yet, on how the whole scheme will work. If the black money is calculated on the market value on the day it is disclosed, then there will not be many takers and then, tax at the highest rate with a penalty on accumulated wealth can also be a big dampener.
It is expected that the full scheme with complete details will be announced soon. The past experience, though, suggests that it will be done only after people start raising questions.
The scheme will remain open till September 30, by which, anybody can make a declaration in respect of an undisclosed asset located outside India under the compliance provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Those declaring their assets will have to pay the tax and penalty by December 31.