The government can do without making tax evasion a criminal offence as the existing income tax laws, which provide for rigorous imprisonment up to seven years for wilful default, has not been used effectively to unearth black money, say experts.
"One can be jailed for seven years (rigorous imprisonment) for wilful evasion of tax (above Rs 1 lakh). However, it is implementation of law that needs to be made effective. The Government has not used these provisions effectively", said Rahul Garg, Executive Director, Tax and Regulatory Services, PwC.
Expressing a similar opinion, Uday Ved, Head Tax, KPMG said, "in certain situations, it is still a criminal offence. There are provisions of imprisonment from three months to 7 years...In my career of 25 years, I haven't seen anyone going to jail for income tax lapses".
Facing flak from civil society for not doing enough to deal with the black money, the government has already set up Directorate of Income Tax (Criminal Investigation) and is looking at the possibility of making tax evasion a criminal offence if the source of income is illegal.
"If there is an element of illegality about the source of income or if funds are used for illegal purpose...we can think of classifying these as criminal tax offences", the Finance Ministry official had said.
Under section 276C of the Income Tax Act, 1961, persons wilfully attempting to evade taxes, penalty or interest can be punished with rigorous imprisonment ranging from three months to seven years with fine.