To curb out the black money, FM unveiled a new scheme to tackle domestic black money. The government has proposed to bring in compliance window for domestic tax payers to declare past transaction and come clean by paying 45% of the undisclosed income and assets.

As per the proposed compliance window under Income Disclosure Scheme will open from June 1 to September 30, 2016 with an option to pay amount due within two months of declaration. Curbing of Black Money in Budget 2016.

 

Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Also, the surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.

 

In normal tax disclosure scenario, one needs to pay between 60% and 65% of the undisclosed income whereas, under the mentioned compliance window, the tax will be as low as 45%.

 

Regarding income declared in these declarations, there will be no scrutiny or enquiry under the Income-tax Act or the Wealth-tax Act and the declarants will have immunity from prosecution.

 

In the 2015-16 budget, the government had come out with a similar compliance window for people holding undisclosed assets abroad. However, Jaitley said that tax evasion will be “countered strongly”. The capability of the tax department to detect tax evasion has improved because of enhanced access to information and availability of technology, the minister said.

 

Last year the black money window for undisclosed foreign assets yielded Rs 2,428.4 crore in tax to the government, much less than the amount expected. A total of 644 declarations were made under the compliance window. Those declaring under the window were liable to pay tax at the rate of 30% and an equal amount of 30% by way of penalty on the value of assets declared by December 31, 2015.

 

Unlike a scheme giving opportunity to those with undisclosed foreign assets to come clean, which is largely seen to have failed, this plan provides immunity from prosecution. With such an effort, it seems that Modi Government is keen to unearth the black money.

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