Steps Taken To Curb Black Money in India

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Current Affairs: Union government has taken following steps to curb black money in the country:

current affairsConstitution of Special Investigation Team(SIT)

Constitution of a Special Investigation Team (SIT), in May 2014, with two former judges of the Hon’ble Supreme Court as Chairman and Vice-Chairman, inter alia, to deal with issues relating to black money stashed abroad;

Introduction of Undisclosed Foreign Income and Assets(Imposition of Tax) Bill, 2015

In order to fulfill the commitment made by the Government to the people of India through the Parliament, the Black Money (Undisclosed Foreign Income and Assets (Imposition of Tax)) Act, 2015 has been enacted. Relevant rules [Black Money(Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015] under the said Act have been framed.

The salient features of the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 are as under:-

Rate of tax and penalty – Undisclosed foreign income or assets shall be taxed at the flat rate of 30 percent without any exemption, deduction or set off of any carried forward losses. The penalty for non-disclosure of income or an asset located outside India will be equal to three times the amount of tax payable thereon, i.e., 90 percent of the undisclosed income or the value of the undisclosed asset, in addition to tax payable at 30%.

The act also provides for stringent penalties and enhanced punishment for violation of various provisions. Prevention of Money Laundering Act(PMLA), 2002 has been amended to include offence of tax evasion under this Act, as a scheduled offence under PMLA.

Failure to furnish return in respect of foreign income or assets shall attract a penalty of Rs.10 lakh. This will also be punishable with rigorous imprisonment for a term of six months to seven years. The same amount of penalty is prescribed for cases where although the assessee has filed a return of income, but he has not disclosed the foreign income and asset or has furnished inaccurate particulars of the same.

The punishment for willful attempt to evade tax in relation to a foreign income or an asset located outside India will be rigorous imprisonment from three years to ten years. In addition, it will also entail a fine.

Abetment or inducement of another person to make a false return or a false account or statement or declaration under the Act will be punishable with rigorous imprisonment from six months to seven years. This provision will also apply to banks and financial institutions aiding in concealment of foreign income or assets of resident Indians or falsification of documents.

To protect persons holding foreign accounts with minor balances which may not have been reported out of oversight or ignorance, it has been provided that failure to report bank accounts with a maximum balance of upto Rs.5 lakh at any time during the year will not entail penalty or prosecution.

One time compliance opportunity – The Black Money Act also provided a one-time compliance opportunity for a limited period (from 1st July, 2015 to 30th September, 2015) to persons who have any undisclosed foreign assets which have hitherto not been disclosed for the purposes of Income-tax. Such persons were allowed to file a declaration before the specified tax authority.

The declarants are required to pay tax at the rate of 30 percent and an equal amount by way of penalty. Such persons will not be prosecuted under the stringent provisions of the new Act.Rs. 4147 crore of Undisclosed foreign assets have been declared vide 638 declarations under the one time compliance opportunity.

Benami Transactions(Prohibition) Bill

As regards curbing domestic black money, a new and more comprehensive, the Benami Transactions (Prohibition) Amendment Bill, 2015 has been introduced in LokSabha to amend the Benami Transactions (Prohibition) Act(BTPA) 1988.

The new amended law will enable confiscation of Benami property and provide for prosecution, thus blocking a major avenue for generation and holding of black money in the form of Benami property, especially in real estate.

Prevention of Money Laundering Act(PMLA):

The offence of concealment of income or evasion of tax in relation to a foreign asset will be made a predicate offence under the Prevention of Money Laundering Act, 2002 (PMLA). This provision would enable the enforcement agencies to attach and confiscate unaccounted assets held abroad and launch prosecution against persons including in laundering of black money.

Amendment of PMLA: The definition of ‘proceeds of crime’ under PMLA is being amended to enable attachment and confiscation of equivalent asset in India where the asset located abroad cannot be forfeited.

Inclusion of predicate offences: – Undisclosed Foreign Income and Assets(Imposition of Tax) Bill, 2015 also proposes to amend Prevention of Money Laundering Act (PMLA), 2002 to include offence of tax evasion under the proposed legislation as a scheduled offence under PMLA.

Section 132 of the Customs Act, 1962 has been included in Finance Bill, 2015 making false declaration as predicate offence.

Thus, in keeping with the commitment of the government for focussed action on black money front, an unprecedented and multi-pronged attack has been launched to root out the menace of black money. The Government is confident that this new law will act as a strong deterrent and curb the menace of black money stashed abroad by Indians.

FEMA

Necessary amendments has been proposed in the FEMA by inserting Section 37 (1), (2) & (3) vide clause 168 of the Finance Bill, 2015 incorporating special provisions relating to assets held outside India in contravention of section 4.

The Foreign Exchange Management Act, 1999 (FEMA) is also being amended to the effect that if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of this Act, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India. These contraventions are also being made liable for levy of penalty and persecution with punishment of imprisonment upto five years.

Automatic Exchange of Information(AEOI):

Joining the global efforts to combat tax evasion, including supporting implementation of a uniform global standard on Automatic Exchange of Information on a fully reciprocal basis, facilitating exchange of information regarding persons hiding money in offshore centres.

Legislative measures, wherever required, including amendment to section 285BA of the Income-tax Act, 1961 vide Finance (No.2) Act, 2014 facilitating the Automatic Exchange of Information.

Limiting Cash transaction:

A few other measures are also proposed in the Budget for curbing black money within the country. The Finance Bill includes a proposal to amend the Income Tax Act to prohibit acceptance or payment of an advance of Rs. 20,000 or more in cash for purchase of immovable property.

Quoting of PAN is being made mandatory for any purchase or sale exceeding the value of Rs. 1 lakh. The third party reporting entities would be required to furnish information about foreign currency sales and cross border transactions. Provision is also being made to tackle splitting of reportable transactions. To improve enforcement, CBDT and CBEC will leverage technology and have access to information in each other’s database.

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