Govt cracks the whip on black money

BLACK MONEY: I-T officials will be allowed to open filings up to 16 years 30% tax on unexplained cash

A mandatory reporting of assets held by individuals abroad and the re-opening of income tax returns filings up to 16 years are among the many measures that Finance Minister Pranab Mukherjee announced to rein in black money. Mukherjee said the government would also bring a white paper on the subject in the current session of Parliament.

To bring back black money, the government will strengthen tax laws, introduce changes in the tax structure to make evasion difficult and pass legislation, the minister said.

“The government will expedite coordinated implementation of decisions being taken to improve delivery systems, governance, and transparency, and address the problem of black money and corruption in public life,” Mukherjee said in his Budget speech.

IN BLACK & WHITE 
In February, CBI Director A P Singh pegged the amount of black money at $500 billion. Steps to address this issue include:

• Introduction of compulsory reporting in case of assets held abroad
• Reopening of filings up to 16 years in relation to assets held abroad
• 82 Double Taxation Avoidance Agreements and 17 Tax Information Exchange Agreements finalised
• Directorate of Income Tax Criminal Investigation established 
• White paper on black money in the current session of Parliament 
• On cards are Money Laundering (Amendment) Bill; Benami Transactions (Prohibition) Bill; and National Drugs and Psychotropic Substances (Amendment) Bill 
• General Anti-Avoidance Rule to counter aggressive tax avoidance schemes

The issue of black money, estimated at $500 billion, was a major source of embarrassment for the government last year as civil society groups and opposition members repeatedly stalled Parliament proceedings and put the government in the dock.

Mukherjee said the issue of black money was one of the five objectives the government will effectively address this fiscal year.

The finance minister announced the government had signed 82 Double Taxation Avoidance Agreements and finalised 17 Tax Information Exchange Agreements. Information regarding bank accounts and assets held by Indians abroad have started to flow in, he added, and in some cases prosecution would be initiated soon.

Mukherjee said the government proposed to introduce a General Anti-Avoidance Rule (GAAR) to counter aggressive tax avoidance schemes. It will also try to ensure it is used in appropriate cases by enabling a review by a GAAR panel. The government is also planning tax deduction at source on the transfer of immovable property above a specified threshold.

Mukherjee also introduced a number of measures on the tax front to check the generation of unaccounted money. These include tax collection at source on cash purchase of bullion or jewellery in excess of Rs 2 lakh; tax deduction at source on the transfer of immovable property (other than agricultural land) above a threshold; tax collection at source on trading in coal, lignite and iron ore; and increasing the onus of proof on closely held companies for funds received from shareholders and taxing share premium in excess of fair market value. Further, the finance minister said unexplained money, credits, investments, expenditures and such would be taxed at the highest rate of 30 per cent irrespective of the income slab.

The finance minister said the government was committed to enact a public procurement legislation to enhance confidence in public procurement and to ensure transparency. Mukherjee said the Bill would be introduced in the Budget session of Parliament.

Among other things, the finance minister said the government would introduce the Prevention of Money Laundering (Amendment) Bill, 2011; the Benami Transactions (Prohibition) Bill, 2011; and the National Drugs and Psychotropic Substances (Amendment) Bill, 2011, to strengthen the implementation of a national policy on narcotic drugs.