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The dark side of elections

In a first of its kind move, the income-tax department will scan the tax returns of the winner and second closest contender in each Lok Sabha constituency and tally these with the asset disclosures they have made.

india Updated: Apr 02, 2014 02:13 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times

What is black money?

Black money is income on which tax is evaded. It represents a large part of an active economy where transactions are carried out in cash circumventing banking channels.

Which are the most common areas to generate and use black money?

Property deals, bullion and jewellery purchases, financial market transactions, rigging of markets through foreign entities using instruments such as participatory notes, manipulations through entities claimed to be constituted for nonprofit motive, differing tax rates in different tax jurisdictions, under-invoicing and money laundering using the hawala or the informal banking route are among the common methods used for generating black money.

How do elections spur spending?

The campaigning spend by all candidates in this year’s Lok Sabha elections are expected to top Rs 30,000 crore (about $5 billion), according to the Centre for Media Studies — three times what politicians had spent in the previous national elections in 2009.

This will be second only to the $7 billion spent by candidates in the US presidential elections in 2012. The Election Commission has set the official limit on campaign expenditure at Rs 70,00,000 for each candidate for the bigger constituencies. Candidates, however, are believed to spend more than this limit on a variety of components ranging from advertising blitzkriegs across media platforms, to sometimes alleged handing out of liquor and cash to voters. Spending by cash during poll campaigns can enable people to bring in black money into the legitimate financial system and obscure the source of slush funds.

What steps have the authorities taken to clamp down on the use of black money during polls?

In a first of its kind move, the income-tax department will scan the tax returns of the winner and second closest contender in each of the 543 Lok Sabha constituencies and tally these with the asset disclosures that candidates have made in their affidavits while filing nominations for the polls.

The move is aimed at collating information and clamping down on use of black money by candidates if they were later found to have under-reported their earnings.

Since it is not possible to assess each and every affidavit by the I-T department, given the number of candidates fighting the polls across the constituencies, the department will take up the affidavits of the top two candidates in a seat post the results are out.

Besides, the I-T department will also pool data from affidavits to find out if there were an abnormal jump in some candidates’ earnings between 2009 and 2014. It will also initiate action in those cases where there is a prima facie evidence that the candidate has furnished wrong details.

These are part of the EC’s overall plans to clamp down the use of black money by candidates during the polls.

The commission has asked all state chief electoral officers (CEOs) to compile the affidavits in an electronic ‘data sheet’ format, which will better enable the I-T authorities to scrutinise these statements that essentially talk about a candidate’s liabilities and assets.

The EC had wanted the I-T department to compare the disclosures of all kinds of assets including cash of all candidates with their income tax returns.

The I-T department, however, said it will compare the affidavits instead as it was "not practical" to go through the statements of each and every candidate.

What other measures has the EC and the I-T department taken to keep an eye on the use of black money?

The Central Board of Direct Taxes (CBDT) has also deputed 700 Indian revenue service (income tax) officers as ‘expenditure observers’ to various constituencies under the command of the EC. The specific brief of these officers would be keep a close eye on spending patterns by candidates and collate these data for further action.