The government might offer another chance to tax cheats to come clean and keep a part of the money.
The Union cabinet decided on Thursday to amend tax laws to let people who admit to depositing illicit cash in banks to get back half of it after four years.
But, government sources said, if one doesn’t come clean and is caught then the money will be taxed at 60%, which can go up to 90% plus possible jail time.
The changes might be brought to Parliament as a money bill, which does not require bipartisan support. Money bills, simply put, are those that involve imposition or abolition of taxes.
“The Cabinet decision yesterday (Thursday) was a precursor to a proposal to amend the tax laws in this session of Parliament,” said an income tax official.
Half of the deposit (what remains after the tax is deducted) would have to remain locked-in for a period of four years in case it is declared as unaccounted, and five years in case the depositor does not declare so but the disparity is subsequently detected by the income tax department.
“Thursday’s Cabinet decision was taken with the view of moving a money bill in Parliament,” the official said.
The government had earlier said tax authorities would keep an eye on bank deposits above Rs 2.5 lakh. Any mismatch between wealth and income would invite heavy taxes and penalty to the tune of 30% tax and 200% penalty. A jail term was also mentioned.
Sources in the income tax department explained that the lowering of the tax amount was to pre-empt litigation.
“Any income wealth mismatch could always be shown in the income tax return and for that 30% tax has to be paid. It is difficult for the tax authorities to ascertain the year when black money was generated and so the proposed 30% tax and 200% penalty on it can be litigated,” the official said.
Girish Vanvari, KPMG national head of tax, said: “Amending the Income Tax Act was necessary to ensure that tax notices are not challenged in any court. And this tax will be applicable on all deposits from November 8, onwards.”
For our full coverage on demonetisation and black money crackdown, click here