This was revealed by the standing committee on finance, quoting various studies and estimates. It highlighted the lack of a reliable estimation of unaccounted income and wealth.
Given that the GDP stood at Rs 64.5 trillion in FY10 and Rs 76.7 trillion in FY11 (in old series), black money could amount to Rs 4.5-77.4 trillion in FY10 and Rs 5.3-92.08 trillion in the following year.
These estimates were given by the National Institute of Public Finance and Policy (NIPFP), the National Council of Applied Economic Research (NCAER), and the National Institute of Finance Management (NIFM). The previous UPA government had commissioned studies by these institutions.
The report, submitted to Parliament on Monday, also quoted these studies, estimating that the black money stashed away by Indians abroad was in the range of $216.48 billion to $490 billion between 1980 and 2010.
Besides, the committee, chaired by former law minister Veerappa Moily, pressed for the earliest introduction of the direct taxes code (DTC) in order to simplify and rationalise direct tax laws in the country.
Moily told Business Standard that the Income Tax Act, due to its various amendments, had become a ‘fountain of black money generation’, and hence the entire Act needs to be simplified instead of making adhoc amendments.
The committee on direct taxes code, under the ministry of finance to overahaul the Income Tax Act and led by Akhilesh Ranjan, is slated to submit its report on July 31, after two postponements.
“The reforms in direct taxes are still pending and are not in tandem with reforms in indirect taxes such as goods and services tax (GST). Any amendment in the installment is not going to help,” said Moily.
The studies found that sectors with the highest unaccounted income included real estate, mining, pharmaceuticals, pan masala, gutkka and tobacco, bullion and commodity markets, film industry, educational institutes and professionals. Other sectors, namely securities market and manufacturing, also showed high incidence of unaccounted income.
While NIPFP gave a range for the quantum of black money from 10 per cent to 72 per cent, NIFM said it was 7 per cent-42 per cent, and NCAER estimates put it at 55 per cent to 120 per cent of the economy. Different methodologies were used for calculating the quantum of black money.
“There are no reliable estimates of black money generation or accumulation and neither is there an accurate well-accepted methodology for making such estimation. Among the estimates made so far, there is no uniformity or consensus about the best methodology or approach to be used for this purpose,” the report pointed out.
In fact, the report said that the chief economic adviser felt there is no scope for arriving at a common estimate of unaccounted income by combining estimates from the three reports. “There has been no action in the last five years on black money. The Modi government has not taken any step to implement recommendations made by either the Justice MB Shah-headed special investigation team (SIT) on black money or from these three studies,” Moily told this newspaper.
The SIT, led by Shah, had recommended a cap on cash holding limit to Rs 1 crore instead of its earlier suggestion of Rs 20 lakh. It had also recommended that the entire amount found in seizures crossing that limit should go to the government treasury.
On the directions of the Supreme Court , the government, in May 2014, had constituted the SIT, which has so far submitted at least five reports.