The government is working out the details of a voluntary income disclosure scheme that would offer a window for bringing back undisclosed assets stashed away in overseas tax havens into the country’s financial system.
The Offshore Voluntary Compliance Scheme will cover Indian organisations, citizens and non-resident Indians (NRIs), and offer immunity from criminal prosecution and imprisonment, besides lower rates of interest and penalties.Also, the authorities will not insist on the source of the money once it is disclosed voluntarily. But in case the tax department tracks down undisclosed assets through its networks, the holder of the money would face "strong punitive actions, including high penalties, prosecution and even imprisonment", said a government source.
The last such offer — the Voluntary Disclosure of Income Scheme (VDIS), introduced in 1997 to fight internal black money generation — was an unconventional, but successful one. More than 350,000 people disclosed their income and assets under the scheme that brought in R7,800 crore. The scheme was closed on December 31, 1998.
An expert group of the Central Board of Direct Taxes (CBDT), assigned by the government to curb the generation and transfer of black money abroad and bring the funds back, recommended the new scheme.
The source said, “It will be modeled on the lines of the Offshore Voluntary Disclosure Initiative run by the Internal Revenue Service in the US.”
Under attack by civil society and social activist Anna Hazare for alleged inaction over money stashed away in foreign accounts, the government proposed an action plan, including amendment of tax treaties with other countries.
A multi-disciplinary committee — involving think-tanks such as the National Institute of Public Finance and Policy, National Institute of Financial Management and the National Council for Applied Economic Research — has been set up to estimate the quantum of black money generated in India.
Earlier, interim recommendations of a BJP task force estimated the amount generated since Independence at $500 billion (about R22.5 lakh crore) to $1.4 trillion (about R63 lakh crore).
A recent study by Global Financial Integrity, a Washington-based research group, estimated the current value of illicit money outflow from India at $462 billion (about R2079,000 crore).