Spooked by the new black money law, Swiss and other European banks have asked Indian clients to disclose their accounts to the Indian tax authorities. The move comes from the banks during a three-month compliance window issued by Indian tax authorities for disclosure of all undeclared foreign assets, to save themselves from being accused of 'abetting' the hoarding of untaxed assets.
These banks, which include those headquartered in Switzerland and London, are asking their customers from India, including those having turned NRIs, to avail the ongoing 'one-time compliance' window provided by the Indian tax authorities to disclose their undeclared foreign assets.
Besides, these banks are also asking their clients to give fresh undertakings to state that they are 'in compliance' with all the laws in their home countries, executives at some of these large financial institutions said.
Under the new law, a three-month compliance window has been given for disclosure of all undeclared foreign assets till next month, for which they would need to pay 30% tax and 30% penalty and escape further action.
After this window, anyone with undisclosed foreign assets would have to pay 30% tax and 90% penalty and they would also be liable for jail term of up to 10 years. The law also provides for 'punishment for abetment'.
This provision would be applicable to everyone who "abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to tax payable under this Act which is false and which he either knows to be false or does not believe to be true or to commit an offence".
The abettor would be "punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine".
Swiss banks, long perceived to be safe havens for parking unaccounted funds, have also started asking for auditor certificates from high net worth individuals and corporate clients to vouch for the "clean status" of their money. These Swiss banks, including some European ones with their branches in Switzerland, are seeking to come clean on illicit funds and wish to ensure that no untaxed money is stashed in their accounts.
India is aggressively making efforts to bring back illicit money parked by its citizens overseas and Switzerland has also agreed to cooperate on the issue.
Swiss banks are asking their Indian customers to provide fresh undertakings that all taxes have been paid on funds deposited by them in these accounts.
Such directives are believed to have been issued to high networth individuals, wealth management and portfolio management clients, sources said.
Indian authorities are already pursuing cases related to its citizens who had kept unaccounted funds in HSBC's Geneva branch, after receiving a list of names from the French government few years back.
HSBC was asked by the Indian authorities to show cause why action should not be initiated against it in case of non-cooperation with regard to "suspected tax evaders and offenders of tax crimes". The latest on these notices could not be ascertained.
HSBC has come under regulatory cross hairs in multiple jurisdictions including India, following an expose that revealed thousands of entities allegedly parked their illicit funds at its Swiss branch.
To curb the black money menace, a Supreme Court constituted special investigation team is probing various cases while the government would soon be coming out with a stringent law that provides for hefty penalties as well as imprisonment for stashing away unaccounted money.
Efforts are already underway in India to bring to book those who were named in the HSBC list and against whom the Indian government has garnered evidence.
Meanwhile, Switzerland is also moving towards automatic exchange of tax information with various jurisdictions, including India.
Indian and Swiss officials have also held high-level deliberations on boosting co-operation with regard to the black money problem.