Four-month window to come clean on black money

Long under attack for not delivering on its poll-time promise of bringing back all black money stashed abroad within 100 days of coming to power, the Narendra Modi government today fell back on the softer option of allowing voluntary disclosure of such income.

Finance Minister Arun Jaitley announced a limited-period compliance window for domestic taxpayers to declare their undisclosed income and pay a tax of 45 per cent: 30 per cent tax, 7.5 per cent surcharge and 7.5 per cent penalty.

The surcharge will be called Krishi Kalyan surcharge. The surcharge will be used for agriculture and rural economy.

In 1997, the government had come out with the first voluntary disclosure of income scheme. According to one estimate, the government was able to collect Rs 7,800 crore through that scheme.

"One-time window for voluntary disclosure by delinquent taxpayers finds its way back into legislation, and it's encouraging to see Jaitley not propose a prohibitive penalty on disclosure," BMR Legal Managing Partner Mukesh Butani said.

The government plans to open the window from June 1 to September 30. The taxpayers will have the option to pay the tax within two months of disclosing the income.

"There will be no scrutiny or inquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution," Jaitley said. "Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions."

Jaitley added that the government was "fully committed to remove black money from the economy" and once the window shuts, it would like to focus all its "resources for bringing people with black money to book."