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Compliance window for those with undisclosed income abroad to come clean by paying 30 per cent tax and 30 per cent penalty
Lok Sabha on Monday passed a bill to deal with black money stashed abroad through high monetary penalty and criminal prosecution with the government allaying fears that innocent people could be harassed under the proposed "deterrent" law.
Piloting the Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, Finance Minister Arun Jaitley said there would be short compliance window for persons having undisclosed income abroad to come clean by paying 30 per cent tax and 30 per cent penalty.
Once the compliance window closes, anyone found having undeclared overseas wealth would be required to pay 30 per cent tax, 90 per cent penalty and face criminal prosecution, he said while winding up the debate on the bill which was later approved by the House.
For those wanting to come clean, Jaitley said there would be a compliance window in two parts -- to declare assets and to pay 30 per cent tax and 30 per cent penalty.
Citing an example, he said, there could be a two-month window to declare overseas assets and within six months one would have to pay tax and penalty.
Jaitley said the law will help bring black money in the declared economy, improve tax collections and would eventually facilitate lowering of tax rates.
Noting that this bill was specifically to target black money stashed abroad, he said a separate benami bill will soon be brought before Cabinet to tackle domestic black money.
"This law will act as a deterrent...It will act as a deterrent and help us in getting the assets back by people declaring them," he said, adding the law also had a provision for attachment of equivalent properties in India.
Rejecting the Opposition charge that the stringent provisions could result in harassment of innocent people and students, he said, "we don't want to proceed against trivial violations. But then the big fish must not get away in the garb.
"Let us not fire from the shoulders of these innocent students in order to make sure that no harsh action is taken on the big fish itself."
Jaitley said those involved in terrorism and money laundering would not be allowed to make use of the compliance window to come clean.
Referring to the domestic black money, the finance minister said the issue was being dealt with under the provisions of the Income Tax Act.
"The need to curb domestic black money is extremely important. We need to bring slowly more and more of our economy into declared economy," he said, adding it would improve tax collection and enhance the Gross Domestic Product.
Higher realisation, he added, would enable the government to "bring down the taxation. If parallel black money (in brought) into the economy, then the taxes that government charges goes down and that helps citizens."
Responding to the queries on getting information about black money holders, the Minister said India was pushing for the automatic exchange of information at international forum especially at G-20 meetings and hoped that a mechanism would be put in place by 2017.
In addition, the US government is also pushing Foreign Account Tax Compliance Act (FATCA) to check unlawful financial activities.
Thereafter, he said, it would become very difficult for persons to hide their assets as the government would have access to information real time.
"All those who keep money unlawfully or assets outside the country, the time is running out for them. World is moving towards automatic exchange of information," Jaitley said.
Congress member Shashi Tharoor had earlier raised the issue that there were four fatal flaws in the new legislation as the government would not have access to information about the persons who it intended to prosecute.
"Some have supported it whole heartedly, some like Tharoor very grudgingly. I don't think Shashi's heart is into this bill. Therefore he started by saying that this bill has four fatal flaws and won't achieve anything and ended by saying it is draconian. It can be either of the two, can't be both," he said.
He also took a dig at Tharoor by observing that "our homegrown friend from Rohtak (Deepender Hooda)...his experience was much more than your experience from Manhattan because he knew the history of evolution (of black money)."
He further said Swiss authorities, which were initially reluctant to share information about the HSBC accounts describing them as stolen, have agreed to cooperate with the government's efforts to pin down black money holders.
On the basis of information provided by the French government about 600 HSBC accounts, the government has filed criminal prosecution against 121 persons, Jaitley said.
The government had to be careful while dealing with such information as international treaties and obligations were involved, he said, adding that two countries have objected to disclosure of names of account holders.