The government moved on Monday to tweak tax laws and give another chance to those with illicit cash to come clean, hoping the offer will bring a large amount of untaxed money back into the economy.
Finance minister Arun Jaitley placed for Parliament’s approval a new income disclosure plan -- Pradhan Mantri Garib Kalyan Deposit scheme – that will charge 50% tax on unaccounted for cash. An individual making the declaration will also have to park a quarter of the total sum in a non-interest bearing deposit for four years.
The one-time scheme, which ends on December 30, will kick in once the Income Tax, 1961, is amended. Afterwards, if someone owns up to illicit money, she will have to pay the government 75% of it. If caught by the tax authorities, the tax will increase to 85%.
Jaitley introduced the tweaked tax law in parliament as a money bill, which does not require bipartisan support. The government does not have a majority in the upper house, Rajya Sabha.
The proposal is the latest in a series of high-stakes policy moves by the government, three weeks after it ordered the draining out of 86% of cash in the economy to fight corruption and counterfeiting. The rollout of new bank bills to replace banned 500-and 1,000-rupee notes has been bumpy, with the government announcing near-daily changes in rules to manage the transition.
- A new income disclosure plan was placed in the parliament by finance minister Arun Jaitley.
- 50% tax will be charged on unaccounted for cash.
- The disclosures under the Pradhan Mantri Garib Kalyan Yojana will ensure that no questions are asked about the source of the fund.
- The tweak in the income tax law is another chance to those with illicit cash to come clean.
The government has billed the so-called “demonetisation” a “surgical strike” on black money. But opposition parties have either opposed the move as useless in fighting corruption or criticised its execution and stalled parliament for days now.
The new tax proposal comes following a surge in deposits in previously empty accounts the government opened for the poor. Tax officials fear these account holders are being lured into laundering money on behalf of big-time tax evaders.
At present, if one is caught evading taxes, one pays the government between 40% and 60% of the amount discovered. The new rates will apply once the amendment is approved.
The cash coming in through the new scheme will be spent on infrastructure and irrigation projects, housing, and building toilets.
“The disclosures under the Pradhan Mantri Garib Kalyan Yojana will ensure that no questions are asked about the source of the fund. It would be immune to wealth tax, civil laws and other tax laws,” said revenue secretary Hasmukh Adhia. But he added that the disclosures will not be immune to money laundering, narcotics, and foreign exchange violation acts.
A total disclosure of Rs 65,250 crore of unaccounted for wealth in the form of cash and other assets was made in the Income Disclose Scheme 2016 that closed on September 30. This fetched the government just a little under Rs 30,000 crore in taxes.