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Tax Blow lessened on Black Money

The government has decided to soften the tax blow on its amnesty scheme to encourage Indians with hidden assets to come clean. They can pay effective tax — including surcharge and penalty — of about 31% against 45% stipulated in the Income Declaration Scheme 2016. The move to lower tax outgo is reflected in a clarification which broadly says the government will not question the source of income from which tax is paid on undeclared incomes.
Modi government softens tax blow on black money scheme

To illustrate: if a person were to declare undisclosed assets valued at say Rs 100 crore, her tax outgo would work out to Rs 45 crore under the scheme. The balance Rs 55 crore would be deemed as her legitimate income. However, if the government does not question the source of income from which the tax is paid, the undeclared income would be Rs 145 crore, bringing down the effective tax rate to about 31%. The government, that is issuing a clarification to this effect, reckons there would be more takers for the scheme if the tax blow is softened, said a senior official.

A huge publicity campaign has already been launched to market the scheme that would enable Indians to come clean or face disastrous consequences. “We lose our peace by violating rules, why not give correct information about our income and assets to government?” Prime Minister Modi had said in the radio address last¬†week.

The NDA government’s earlier scheme that allowed amnesty to Indians with undisclosed assets overseas failed mainly due to the lack of trust on penalties after coming clean on concealed incomes. The government wants to ensure that there no such trust deficit, said officials.

Tweaks or mid course corrections are been uncommon in amnesty schemes as the idea is to market them better, and also shore up the government’s revenue. Clarifications, for example, were issued in the Voluntary Disclosure of Income Scheme 1997 when the government garnered over Rs 9000 crore.

Last month, the Central Board Of Direct Taxes had, however, made it clear that money earned through graft will not qualify under the scheme. The scheme shall not apply in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such undisclosed income cannot be made,” set of the clarifications issued in the form of Q&A said.

An emphatic ‘No’ was the response to a question on whether a person can declare undisclosed income which has been acquired from money earned through corruption.

The latest set of clarifications, on the other hand, is set to say an emphatic No to a question on whether questions will be asked on the source of income from which a person pays tax on undeclared incomes.
Source: Economic Times



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