Govt may offer amnesty scheme for defaulters

RUN UP TO THE BUDGET 2008-09

The finance ministry is considering a one-year "mini-amnesty" scheme for income and corporation tax defaulters.

Under this scheme, North Block may waive both interest and penalty for defaulters and an announcement to this effect is expected in Budget 2008-09 due next month, according to a senior finance ministry source.

The proposal offers a waiver from the 12 per cent a year interest charged under sections 234A, 234B and 234C for defaults in furnishing tax returns, paying advance tax and deferring advance tax respectively.

There is currently no provision in the Income Tax Act to waive interest except in limited cases. The Act is likely to be amended to facilitate this temporary waiver.

However, the Act provides for a penalty waiver. Penalty is charged up to 300 per cent on tax and interest amount for defaults in direct tax payments.

The last such amnesty scheme was offered in 1997 when income-tax defaulters were given an opportunity to disclose their income at prevailing tax rates and immunity from major economic offense laws.

It was effective for six months and garnered around Rs 10,000 crore. Though it faced criticism, it was the first such scheme to yield results.

This scheme is of a piece with the ruling United Progressive Alliance's common minimum programme that calls on the government to devise an innovative scheme to unearth black money.

With direct taxes growing at a historic high of over 42 per cent and likely to cross Rs 3,00,000 crore in 2007-08, the objective of this move is aimed at improving compliance rather than meeting a resource crunch.