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A huge sum of Rs 65,250 crore in black money was declared through the one-time declaration window, marking the biggest-ever disclosure of hidden wealth that will rake in Rs 29,362 crore in taxes to the exchequer.
While the black money declarations may go up further once all the online and manual filings of undisclosed assets filed at the end of the four-month window on September 30 are compiled, the government will get this fiscal nearly Rs 14,700 crore or half of the total taxes due.
Making the announcement about the declarations made under the Income Declaration Scheme, Finance Minister Arun Jaitley said 64,275 declarants disclosed an amount totalling Rs 65,250 crore.
"Some disclosures have not been tabulated... This figure could be revised upward once the final tabulation is done," he told a news conference in New Delhi.
Government had offered a one-time chance to holders of income and assets that had illegally escaped taxes, to come clean by paying 45 per cent in tax and penalty.
On the declarations compiled so far, the government will get Rs 29,362.5 crore in tax and penalty. The declarants can pay this amount in two installments up to September 30, 2017 half or Rs 14,681.25 crore will accrue this fiscal.
Last year, under a similar scheme for foreign black money holders, 644 declarations of undisclosed foreign income and assets were received, and just Rs 2,428 crore was collected in taxes.
"We will maintain secrecy of these declarations," Jaitley said, adding the tax would accrue to the Consolidated Fund of India and would be used for welfare of public.
The average declaration per declarant comes to Rs 1 crore.
A total tax of Rs 9,760 crore was collected under the Voluntary Income Disclosure Scheme amnesty scheme brought by the then Finance Minister P Chidambaram in 1997.
"In 1997, the tax collected was Rs 9,760 crore," Jaitley said, adding that VDIS and IDS cannot be compared as the two schemes are different.
While IDS is not an amnesty scheme, VDIS provided blanket amnesty, he said. Taxation under IDS is charged at the rate of 45 per cent while the effective rate of tax in the 1997 scheme was in single digit.
Jaitley also listed out the steps taken by the government to unearth unaccounted money in over two years, including Rs 56,378 crore during search operation and Rs 16,000 crore from non-filers of tax returns.
The government, he said, did not want to give a person who hasn't paid tax easier term than one who has been honest in paying taxes and so a 50 per cent penalty of the 30 per cent tax was added.
"It was 30 per cent tax, but the value of asset was taken not for 1997, but for 1987. So the effective rate of tax was single digit rate of tax. And this is a 45 per cent rate of tax. So the two schemes are entirely different," he said.
Refusing to draw a parallel between the two schemes, he said the two are different and the effective rates are also different.
"This kind of declaration is a positive step because more and more people in the higher tax income are wanting to become more and more tax compliant," he said.
Asked about what course of action the Income Tax Department would take against those holding blackmoney but not declaring in the four-month window, Jaitley said the department has no intention of being vindictive.
"But if the department finds that there is an evasion somewhere, whatever normal activity they have to do they will do," he said.
The finance minister said India was not in general a tax compliant nation.
"At 45 per cent tax, when the average declaration was one crore, it means there were no small traders. These were people with significant resources.
"With so many people declaring money it shows significant number of people want to become tax compliant. It's a very 'good figure' and if you take as part of all the steps that the government has taken cumulatively, these are very significant amounts," he said.
The Income Tax Department had virtually burnt midnight oil to make the IDS a success by remaining open till midnight on the last day to faciliate filings.
Like the foregn blackmoney scheme, the Income Declaration Scheme 2016 is not an amnesty scheme. These schemes extended an opportunity to come clean by paying more than the normal tax.
Between 1951 and 1997, 10 amnesty schemes were announced to declare unaccounted money, most of which were misused. Dishonest tax payers got away in those schemes by paying lesser than normal taxes, with all immunities.
Only two of the past schemes were seen as successful: the income declared under amnesty circular 1985/86 was Rs 10,778 crore, and under VDIS, 1997, Rs 33,000 crore. But the real value of the assets declared was double the value considered for tax purposes. Taxes were paid at less than 50 per cent of the normal rate, with zero interest and penalties.
The Remittances of Foreign Exchange and Investment in Foreign Exchange Bond (Immunities & Exemption) Act, 1991 saw about Rs 2,200 crore of income being declared, with zero taxes payable.
The India Development Bonds, 1991, were also issued under this scheme, with subscribers enjoying immunity from declaring the source of income. They got 9 per cent tax-free interest on the 5-year bond.
IDS 2016 provided opportunity to undeclared wealth holders to escape prosecution by paying 45 per cent tax, including a penalty of 7.5 per cent and surcharge of 7.5 per cent. In order to make the income disclosure scheme a success, the Central Board of Direct Taxes (CBDT) had issued a number of FAQs to address various queries.
With industry raising the issue of difficulties with respect to payment of taxes in a short span, the government permitted paying tax in three instalments. While 25 per cent of the tax is to be paid by November 2016 and March 2017 each, the remaining 50 per cent is to be paid by September 2017.
Absolute confidentiality of the declarations made was promised under the scheme to reassure the declarants.
"This was a major step towards reigning in the parallel economy of the country and merging it with the mainstream. The CBDT endeavours to continuously use non-intrusive methods towards widening and deepening of the tax base," a finance ministry said in a statement.
Earlier, Prime Minister Narendra Modi had appealed to the public to avail the four-month window and come clean. Also more than 5,500 public meetings in various cities were conducted by the department. Innovative publicity methods like Talkathons, Walkathons and Nukkad Nataks were used to spread awareness about the scheme.
"The Department's strategic use of taxpayer information and data mining techniques further spurred the declarations," the statement added.
In a tweet, Modi today appreciated those choosing to be tax compliant and termed it is a great contribution towards transparency and growth of the economy.
"I compliment all those who chose to be tax compliant in IDS-2016. This is a great contribution towards transparency & growth of the economy," Modi said.
The Prime Minister complimented Finance Minister Arun Jaitley and his team at the Finance Ministry for the "hard work" resulting in the successful outcome of IDS-2016.