Finance Minister Arun Jaitley presented the Union Budget 2017 in the parliament on Wednesday. The budget was historic and could be considered unique in a few senses. Firstly, the Modi-government broke the 92-year tradition of presenting the Union budget on the last working day of February. On the other hand, the budget was too close to the shocking announcement of demonetisation, which though conducted with noble intentions had caused some severe trouble to the population. Finance Minister Arun Jaitley started with heaps of praise for the demonetisation and its effect to curb down the flow of black money in the state.
Here are a few steps the Finance Minister announced to further the fight against corruption and a parallel economy fuelled by black money:
1) Cashless/Digital economy
The Finance Minister said that the digital economy was a very important part of the government’s strategy to wipe the system clean and weed out corruption and black money. He said that a cashless ecosystem had a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system. It must be noted that cashless transactions leave a digital footprint and can more easily be tracked back to their sources. He further said that the flow of money into the banking system is expected to energise private investment in the country through a lower cost of credit.
2) Taxation laws:
The Finance Minister said that one of the biggest priorities of the government was to eliminate black money component from the economy. He said that the government and the Ministry of Finance remained committed to making taxation rates more reasonable. He said that the government would attempt to make the tax administration fairer and expand the tax base in the country and in doing so would change the colour of the money.
3) Limitations on cash expenditure
Finance Minister Arun Jaitley proposed to limit the cash expenditure allowable as a deduction, both for revenue as well as capital expenditure to Rs 10,000. He similarly proposed that the limit of cash donation that could be received by a charitable trust was being reduced from Rs 10,000 to Rs 2,000.
4) Limitations on cash transactions:
Addressing the parliament, the Finance Minister said that the Special Investigation Team (SIT) set up by the government had suggested that no transaction of above Rs 3 lakhs should be permitted in cash. he informed the parliament that the government had decided to accept the proposal. A suitable amendment to the Income-Tax Act was proposed in the Finance Bill for the enforcement of the decision, he added.
5) Transparency in Political party funding
The FM said that even after 70 years of Independence the country had not been able to evolve a transparent method for the funding of political parties, which remains essential for fair and free elections. He said that an attempt was made in the past by amending the provisions of the Representation of Peoples Act, the Companies Act and the Income Tax Act to incentivise donations by individuals, partnership firms, HUFs and companies to political parties. Both the donor and the donee were granted exemption from payment of tax if the accounts were transparently maintained and returns were filed with the competent authorities. Additionally, a list of donors who contributed more than Rs 20,000/- to any party in cash or cheque is required to be maintained. Donors have also expressed reluctance in donating by cheque or other transparent methods as it would disclose their identity and entail adverse consequences, he added.
He put down a set of rules that would be implemented for the transparent funding of political parties to ensure free and fair elections across the country. The following rules were as mentioned in his budget speech:
a) In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be `2000/- from one person.
b) Political parties will be entitled to receive donations by cheque or digital mode from their donors.
c) As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from the issuance of a bond.
d) Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Needless to say that the existing exemption to the political parties from payment of income-tax would be available only subject to the fulfilment of these conditions. This reform will bring about greater transparency and accountability in political funding while preventing the future generation of black money.
While some of the issues still need to be addressed and clarity needs to be provided on a few others as to how the government plans to implement them, it can be said that the Narendra Modi-led BJP government has stayed somewhat true to their words when it came to the topic of stopping corruption. Although, only time can tell how properly these schemes were implemented and how effective they were.