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  1. Budget 2016: ‘Step towards a black money free India’

Budget 2016: ‘Step towards a black money free India’

A black money free India will show the true growth in terms of GDP, per capita income, etc. Hence, it is imperative that the evil of black money, parallel economy be put to rest at the earliest.

By: | Updated: March 3, 2016 5:15 PM
black money reu L Budget 2016: Individual taxpayers who have not disclosed income in the past would get an opportunity to disclose such income and be compliant by paying tax at the rate of 30 per cent as increased by surcharge of 7.5 per cent and a penalty of 7.5 per cent, which would sum up to a total of 45 per cent on undisclosed income. (Photo :Reuters)

Finance Minister Arun Jaitley while presenting the Union Budget 2016, proposed a scheme to tackle domestic black money by giving an opportunity to those having undisclosed income to come clean through a one-time compliance window of 4 months, beginning June 1, 2016.

Having announced a 90-days amnesty-like window for disclosing foreign black money in the last year’s budget, it was expected that the government would come up with measures to curb domestic black money as well.

“Our Government is fully committed to remove black money from the economy. Having given one opportunity for evaded income to be declared once, we would then like to focus all our resources for bringing people with black money to books”, the Finance Minister said.

Individual taxpayers who have not disclosed income in the past would get an opportunity to disclose such income and be compliant by paying tax at the rate of 30 per cent as increased by surcharge of 7.5 per cent and a penalty of 7.5 per cent, which would sum up to a total of 45 per cent on undisclosed income. The surcharge levied at 7.5 per cent of undisclosed income will be called ‘Krishi Kalyan surcharge’ and will be used for agriculture and rural economy.

The total tax and penalty for domestic black money holders is less than the rate that the government had levied on foreign unaccounted asset holders last year. As per media report, a total of Rs 4,147 crore of undeclared wealth was declared during the 90-days foreign black money compliance window which ended on September 30, 2015 with a collection of Rs 2,500 crores.

The Income Declaration Scheme is proposed to be effective from June 1, 2016 and shall remain open until September 30, 2016 with an option to pay the amount due within 2 months of such declaration. It is proposed that no enquiry and scrutiny under the Wealth Tax Act and Income Tax Act be undertaken in respect of such declarations and immunity from prosecution under such Acts be provided. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed, subject to certain conditions.

Central Board of Direct Taxes would come out with rules under this scheme.

The Finance Minister while delivering the speech highlighted that although the capability of the tax department to detect tax evasion has improved due to enhanced access to information and availability of technology, the Government would want to give an opportunity to the earlier non-compliant to move to the category of compliant.

The Finance Minister clarified that this is not an amnesty scheme like 1997 VDIS as declarants would be required to pay penalty along with the taxes and that the declarations would have to be done on current valuations not 10 year old valuations like 1997 scheme, as per media report.

In 1997, a total of Rs 33,000 crore of undeclared income was disclosed with a collection of Rs 10,000 crore.

Although the Government is taking various steps to address the menace of black money by increasing the reporting requirements, receiving information from multiple sources, compliance window etc, hope the declarations made under the scheme are as expected by the Government .

To curb the menace of Black Money, a multi-pronged attack is needed. The Government is trying to bring additional measures like bringing more transparency for high-value transactions, encouraging the use of plastic money, introducing tax benefits for internet banking and e-commerce. These would help not only in detecting such transaction but also facilitate timely action.

A black money free India will show the true growth in terms of GDP, per capita income, etc. Hence, it is imperative that the evil of black money, parallel economy be put to rest at the earliest.

The author is Tax Partner & Mobility Leader – People Advisory Services, EY

(Shanmuga Prasad, senior professional – People Advisory Services, also contributed to the article). (Views expressed are their personal)

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