Tax disputes massively increased under NDA rule: Mohandas Pai

Stating that demonetisation has partially tackled the challenge of black money, Pai said the biggest change for India would be in behaviour by people who deal in cash for various reasons.

Tech investor T V Mohandas Pai has said tax disputes have massively increased under the National Democratic Alliance rule and cautioned against giving "draconian powers" to income tax authorities post-demonetisation, saying it would only increase corruption.

The former chief financial officer of IT major Infosys Ltd said citizens have voted the NDA to power to prevent tax terrorism, improve tax administration and reduce tax disputes.

"The last two-and-half years (of NDA rule) have been disappointing as corruption at the tax department has (only) partially come down, disputes have massively increased and tax administration has (only) partially improved," he told PTI.

 "2017-18 Budget is time to deliver on the promise. Demonetisation, a very radical painful measure, now needs to be tempered by incentives and good policy to eliminate the scourge of black money".

Stating that demonetisation has partially tackled the challenge of black money stored as cash across the country, Pai said the biggest change for India would be in behaviour by people who deal in cash for various reasons and also those who deal with and generate black money.

"Many in the real estate business and in trading I spoke to have said clearly that they will reduce use of cash and black money to the bare minimum, as they are scared of getting caught and also feel that it is time for change", he said.

Pai said the behavioural change due to demonetisation should now be leveraged by tax incentives – abolishing capital gains tax on sale of land and property, and gold if held for more than three years -- to reward honesty, prevent manipulation and substantially reduce black money.

"For the last 70 years, hardly anybody has been jailed for tax evasion or black money use. To believe that this will change will be foolish. Reducing income tax to 30 per cent reduced black money, increased compliance", said Pai, a member of Board of Directors of National Stock Exchange of India Ltd.

According to the chairman of Manipal Global Education Services and Aarin Capital Partners, the GST would ensure that more of the value chain is captured formally, reduce cash generation and create a digital footprint to reduce black money generation.

"The use of analytics and big data with an integrated IT system, and increased digital payment will reduce black money and increase compliance," he said.

"Big data can also reduce manipulation of imports and exports, 'hawala' and expose cash trail of terrorist and Maoist activities."