1. Black money: PM Narendra Modi’s Rs 500, Rs 1,000 notes ban renders Rs 14 lakh cr, 86% of value of currency, useless

Black money: PM Narendra Modi’s Rs 500, Rs 1,000 notes ban renders Rs 14 lakh cr, 86% of value of currency, useless

Govt has been taking little steps from setting up of SIT to passing benami act to root out illegal wealth

By: | Published: November 11, 2016 6:16 AM
SIT Chairman Justice (retd) MB Shah, said those people “holding untaxed assets and income” and did not declare it under the two black money declaration windows “will suffer”. (PTI) SIT Chairman Justice (retd) MB Shah, said those people “holding untaxed assets and income” and did not declare it under the two black money declaration windows “will suffer”. (PTI)

PM Modi’s Tuesday announcement to scrap currency notes of R500 and R1,000 has come as a huge blow to those who stash black money. NDA government’s crackdown to flush out black money and counterfeit currency has rendered R14 lakh crore, 86% of the value of Indian currency in circulation as useless.

Hailing the centre’s sudden announcement of demonetising, the SIT on black money, which was notified by the government in 2014, termed it as a “good and a bold” move. SIT Chairman Justice (retd) MB Shah, said those people “holding untaxed assets and income” and did not declare it under the two black money declaration windows “will suffer”.

Curbing black money and returning money held overseas by dishonest Indians was a major electoral promise of the NDA. His first such initiative came when he constituted the SIT, which from time to time, has advocated action under anti-money laundering law for trade-based money laundering. It has also highlighted the need to check the generation of black money in the education sector and religious institutions and charities.

It has suggested a ban on cash transactions of above R3 lakh and capping the cash holdings of companies and individuals at R15 lakh to prevent tax evasion.

In a letter to the RBI Governor, the Justice Shah panel has underlined the need for creating a data warehouse from where various agencies can gather relevant information for taking early appropriate action. It has also asked the revenue department to identify a single point agency which could access the database relating to forex and trade related payments.

In its earlier reports, SIT had sought a tightening of rules governing participatory notes.

The PM was personally involved in the launching of the Jan Dhan Yojaya in August 2014, which will now come handy for villagers in view of the demonetisation.

In another step towards tax compliance, the government renegotiated tax treaties and automatic information exchange agreements with tax havens including the DTAA with Mauritius and Switzerland. Even OECD countries have agreed to share information on foreign account holders with their home countries.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was implemented by the NDA government to bring back money stashed in tax havens abroad. While the scheme ended on Sept 30, 2015, it failed to elicit the kind of response the government was expecting.

The IDS on the other hand, led to the biggest ever disclosure, at least R65,250 crore of undisclosed assets were declared.

The government last month notified the Benami Act, 2016. The new law gives more powers to the authorities to curb benami transactions by confiscating benami properties and imposing stiff penalty.

Industry experts feel that all these measures will have a short-term negative impact. The government is already keeping a strict vigil through big data on high-value transactions such as card payments, cash deposits and correlating it to income tax returns, they said.

It made the quoting of PAN mandatory for all transactions above R2 lakh. It is also seeding Aadhaar with the PAN number to weed out multiple PANs.

“The measures so far taken by the government will definitely clamp down on black money hoarders. A system is being put in place where the country will be at par with the developed economies. Such steps from cash to cashless economies are necessary. Electronic transactions will ensure a clear money trail and make it very difficult for tax evaders,” senior SC lawyer Kevin Gulati said.

He also feels that demonetisation scheme may seem to be anti-people, but will help the country in the long run. But is skeptical about how “real big fish will be caught and how the government will bring back black money stashed in foreign tax havens.”

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