Will the Income Declaration Scheme 2016 to be open from June 1 get a wide response from tax evaders? If tax experts are to be believed the scheme would only get muted response on fears of falling foul of laws other than the Income Tax Act and the Wealth Tax Act.
The government is providing a 4-month window of opportunity starting June 1, 2016, to tax evaders to gain amnesty by coming clean under the scheme by paying 45 per cent tax.
Tax experts told FeMoney that unless there is blanket immunity from prosecution and harassment under other laws, tax evaders are unlikely to come forward to declare their hidden wealth on fears of harassment by other agencies.
“The Government’s intent is good. However, I do not see many people coming forward to disclose their hidden wealth under the scheme since there is immunity only under the I-T Act and the Wealth Tax Act. The person declaring will have the fear of being hauled up under other legislations. There are a plethora of laws under which he or she may be questioned by authorities. That fear will be there,” Amit Maheshwari, Managing Partner, Ashok Maheshwary & Associates told FeMoney.
As an example, Maheshwari points out that a factory owner who comes forward with his black money may be assumed to have amassed wealth by evading excise duty. “The excise department may initiate action under the Central Excise Act,” he said.
Again, a trader who comes up with a disclosure may be assumed to have evaded on value added tax or service tax and may fear prosucution under the respective legislations, Maheshwari pointed out. “The government has to give wider immunity and assurance on confidentiality of information to gain good response to such schemes,” he said.
Suresh Surana, Founder, RSM Consulting Group, is also sceptical about the scheme. Surana feels that while there are gaps in the immunity provided which will deter tax evaders, the tax rate itself is steep. “The scheme is unlikely to get overwhelming response due to the fact that the tax rate is very high at 45 per cent (the highest personal tax rate is 35.535 per cent). Secondly, the tax is based on Fair Market Value of the asset as on June 1, 2016, whereas the original cost may be much lesser. In such cases, the taxpayers may still opt for the Settlement Commission or other options,” Surana said.
On the immunity provisions, Surana agrees with Maheshwari and feels the immunity granted under the I-T Act and the Wealth Tax Act may not be enough to lure tax evaders. “The scheme does not provide any immunity for cases which are covered under the Black Money (Undisclosed Foreign Income and Assets) Imposition of Tax Act, 2015 as well as FEMA and other laws,” he said.