Black Money

Black money topic of the day

The Honorable Finance Minister, Shri Arun Jaitley in his budget speech has signaled government's intention to curb generation of black money across the nation. Citizens now have to abide by the stringent tax rules of the world's largest democracy.

The bill tabled by the FM consists effective provisions to increase the revenue of exchequer and at the same time imbibe the feeling among the citizens to be honest in their tax disclosures. The Special Investigation Team (SIT) on black money has welcomed the announcements made in the Budget to tackle menace of illegal funds and similar assets stashed abroad even as it cautioned that good results in this direction would come only after new laws and measures are implemented in a proper manner.

"We (SIT) are happy about the Budget proposals. All these measures will actually boost our efforts (in unearthing and combating black money). It (Budget) is very happening...now SIT will have some tip to go behind them (tax evaders) who have undisclosed income. It will also have more deterrent effect as there are harsher penalties and prosecution," Vice-Chairman of the high-powered panel, Justice (retd.) Arijit Pasayat said.

Here is a quick peak to the recent developments in the finance bill introduced in the house:

  1. Proposed amendments in the Income Tax Act:

In order to curb generation of black money in the real estate market, Section 269SS and Section 269T of the Income Tax Act are proposed to be amended. The proposed amendment in:

    • Section 269SS: Proposed amendment provides that no person shall receive/pay an amount exceeding ` 20,000 whether as advance or otherwise, in relation to transfer of an immovable property from/to any person through modes otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account. Non compliance of the provisions of the aforesaid Section would attract harsh penalty under Section 271D to the transferor of immovable property being the recipient of money.

    • Section 269T: Proposed amendment provides that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is ` 20,000 or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

      Contravention of this provision would invite penal provisions of the Section 271E making the person making such repayment liable to pay, a sum equal to advance so repaid.

    These amendments will take effect from 1st day of June, 2015.

    In order to make the aforesaid amendments more effective it is proposed to make furnishing of PAN number mandatory for transactions beyond ` 1 lakh.

    1. New bill for the comprehensive new law to deal with black money parked abroad which is likely to be introduced in the current session

     

    This war against black money is promised to be armored with an all new law and shielded with very heavy penalties.

    Here is a glance to the new bill for the comprehensive new law to deal with black money parked abroad which is likely to be introduced in the current session:

    • For tax evaders in relation to foreign asset provision of rigorous imprisonment upto 10 years has been introduced, the said offence will be non compoundable and will have a penalty of 300 %. Further, the offender will not be permitted to approach the Settlement Commission.

    • Non filing of return/filing of return with inadequate disclosures to have a punishment of rigorous imprisonment upto 7 years.

    • Undisclosed income from any foreign assets to be taxable at the maximum marginal rate.

    • Mandatory filing of return in respect of foreign asset.

    • Entities, banks, financial institutions including individuals all liable for prosecution and penalty.

    • Concealment of income/evasion of income in relation to a foreign asset to be made a ‘predicate’ offence under PML Act, 2002

    • PML Act, 2002 and FEMA to be amended to enable administration of new Act on black money.

     

    1. Trade based money laundering

    Further in order to curb trade based money laundering, making false declarations/ documents in the transaction of any business relating to Customs (Section 132, Customs Act) will be brought under the Prevention of Money Laundering Act as a “predicate offence”.

    Also, the Government proposes Benami Transactions (Prohibition) Bill to curb domestic black money to be introduced in the current session of Parliament.

     

    Here in India have a tradition of making stringent provisions but when it comes to their implementation we have a bad track record. Speaking of which Namo government has so far failed to fulfill its promise to bring back the so called Kala Dhan from “Videshi Banks”within the promised duration of 100 days.

    Even the list of names produced by the SIT were at-least a year old. This clearly pinpoints the lack of credibility in the claims of the Namo government.

    The existing legislations, Jaitley admitted, were inadequate for the existing time but taking a glance at the existing laws we feel that the provisions are stringent enough to stop the generation of black money in the nation. The need of the hour is effective implementation of the provisions of law. Building a mountain of provisions is not going to provide a solution to this mammoth task but, effective implementation of provisions surely will.

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