Finance Minister Arun Jaitley on Sunday warned that those who did not declare overseas black money during compliance window will face the consequences as the government will receive information about their wealth under automatic exchange of information, while others who took advantage of the scheme to come clean can “sleep well”.
The Minister also clarified that Rs 6,500 crore of black money, talked about by Prime Minister Narendra Modi in his Independence Day speech, pertained to illegal money of account holders in the LGT Bank of Liechtenstein and HSBC Bank, Geneva, while declarations made under the one-time compliance window totalled Rs 3,770 crore.
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The government’s policy, Jaitley said, “is rationalisation of tax structures, taxing at reasonable rates, placing more money in the hands of small earners, encouraging and promoting the use of plastic money by all sections of society and creating deterrence against those who continue to use unaccounted money.”
In his Facebook post, the Minister also expressed the commitment of the government to fight the menace of the domestic black money by making furnishing of PAN mandatory for cash transactions beyond a threshold.
“The government is at an advanced stage in considering the requirement of furnishing PAN card details if cash transactions beyond a certain limit are undertaken,” he said.
Referring to the declarations made under the black money compliance window which closed on September 30, Jaitley said, “Those who chose to declare between this period would not be prosecuted under the new black money law… These declarants can now sleep well.”
Taking advantage of the one-time 90-days compliance window under the Black Money law, 638 persons declared their income amounting to Rs 3770 crore.
About those who have undisclosed foreign assets but failed to file such a declaration, Jaitley said, “(They) will now be subjected to penal provisions of this law. They will be liable to pay 30 per cent tax and a penalty of 90 per cent, thus leading to confiscation of the assets plus more.
“In addition, they will be liable to prosecution where they can be sentenced up to 10 years. This law will create a deterrent in future against the flight of capital from India.”
“… thus those with illegal assets abroad, who have failed to make declaration, would now stand the risk of information relating to them eventually reaching the Indian taxation authorities.”
On domestic black money, Jaitley said bulk of of it is still within India.
“We thus need a change in national attitude where plastic currency becomes the norm and cash an exception.
“Being seized of this problem, the Government has been working with various authorities in order to incentivise this change. The opening of a large number of payment gateways, internet banking, payment banks and the emerging reality of e-commerce will prompt the use of banking transactions and plastic money rise significantly,” he said.
In the Facebook post titled– The NDA Government’s campaign against black money -– Jaitley said the comparison of the amounts listed under HSBC Bank, Geneva, and through the compliance window with amnesty schemes relating to domestic black money is ill conceived.
“The assessed income of Rs 6,500 crore in HSBC and Rs 3,770 crore declared income during the compliance window should not be treated as income under any immunity scheme. The comparison of these amounts with amnesty schemes relating to domestic black money is ill-conceived. The campaign against domestic black money has to be separately dealt with for which Government is independently taking steps,” Jaitley said.
Modi in his Independence Day speech had said that the government’s efforts to deal with the menace of black money were working and “people have declared undisclosed income of about Rs 6,500 crore. This money will come into the treasury and will be used for betterment of the poor”.
The government’s recent announcement that the compliance window, which closed on September 30, resulted in total disclosure amounting to Rs 3,700 crore drew criticism from some quarters about the amount being less than that mentioned in the Prime Minister’s speech.
Stressing that no society can indefinitely sustain a system where income earners consider tax evasion to be a way of life, Jaitley said high tax rates in the past have encouraged tax evasion.
“Regrettably our high taxation regime in the past eventually ended up encouraging tax evasion. When States tax their people reasonably, they can persuade them to honestly declare their incomes. The early decades after independence witnessed India with high taxation rates, prompting people to evade. The capacity of the State to detect evasion was less than adequate,” Jaitley said.
The Finance Minister said over the years India has slowly started moving towards moderate rates of taxation.
“It has been a conscious strategy of the NDA Government to put more money in the pockets of middle and low income groups by raising exemption limits and incentivising savings through fiscal policy. This will encourage consumption and bring more money into the system. Consumption increases the volumes of indirect taxation,” he said.
Jaitley said to make India more investment friendly destination, the government is committed to lowering of corporate tax rate to 25 per cent over the next four years and also phase out exemptions.
“The Government’s policy is rationalisation of tax structures, taxing at reasonable rates, placing more money in the hands of small earners, encouraging and promoting the use of plastic money by all sections of society and creating deterrence against those who continue to use unaccounted money,” Jaitley said.
In its campaign against black money stashed abroad, he said the government has formulated a conscious strategy to deal with the menace of black money and the first cabinet meeting of the NDA government implemented the direction of the Supreme Court to constitute Special Investigation Team to monitor efforts against black money.
“The UPA Government had tried to evade the Supreme Court direction on one pretext or the other for over three years. The Government swung into action and accelerated all the income tax assessments against those with regard to whom information about holding illegal money abroad in Lichtenstein and in the HSBC bank at Geneva, were available,” he added.