Muted response to black money disclosure window

Assets worth only Rs 4,000 cr declared till mid-August; govt expects pick-up in last 2 weeks

The government's effort to get people to voluntarily disclose their black money, under the Income Declaration Scheme (IDS), has had a tepid response, with only about Rs 4,000 crore reported till mid-August.

The four-month window for disclosing black money deposits will close at the end of this month. The informal target for the scheme was tax collection of Rs 40,000-50,000 crore. To collect that amount, the disclosure would have have to be about Rs 1 lakh crore. Those availing of this scheme would have to pay 45 per cent of their disclosed amount as tax, penalty and cess.

Sources said the government expected to see an upsurge in the rate of disclosures in the last two weeks.

"The scheme has been slow to pick up, with only about Rs 4,000 crore black money disclosure till mid-August. But, we expect higher volumes as the deadline approaches," said a government official.

He added: "This was the trend we had seen in the foreign black money scheme last year."

Another official said, "While there is no official target, the government expects the tax department to collect at least Rs 40,000-50,000 crore in taxes under the ongoing compliance window. This looks difficult."

The total targeted declaration of Rs 1 lakh crore is about three times the Rs 33,000 crore declared under the tax amnesty scheme, Voluntary Disclosure of Income Scheme (VDIS), 1997.

In contrast, only 644 declarations, worth Rs 4,164 crore, were made under the black money window for foreign assets last year, resulting in tax collection of Rs 2,428 crore. The tax rate and penalty was 60 per cent.

A stiff warning from Prime Minister Narendra Modi against the black money holders earlier this month was also expected to trigger more people to avail of the one-time scheme.

In an interview to a private TV channel, Modi had said, "No one should blame me if I take tough decisions after the 30th (of September)."

However, this may not give the correct picture as taxes could be paid in three instalments, the first one by November 30. According to tax consultants, the high tax rate of 45 per cent and the concerns related to confidentiality of declarations are the key deterrents for those who wish to come clean.

FEW DISCLOSE BLACK MONEY

SCHEME:
INCOME DECLARATION SCHEME, 2016

DURATION: 4 months

DEADLINE: September 30

PURPOSE: To get people to voluntarily declare their black money or assets, and avoid prosecution

TARGET (UNOFFICIAL): Rs 40,000-50,000 cr in taxes*

DECLARATIONS (ASSETS): Rs 4,000 cr till mid-August

TAX RATE: 45% (including penalty and cess)

PAYMENT PROCESS:

• 25% by November 30, 2016
• 25% by March 31, 2017, and
• 50% by September 30, 2017