Modi Government Cracks on Black Money, Law on the Anvil

In first full-fledge budget the Modi Government not only unveiled a slew of tough measures to crackdown on hidden assets, but also a brand new law.

Published: 28th February 2015 07:16 PM  |   Last Updated: 28th February 2015 07:16 PM   |  A+A-

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NEW DELHI: Action against illegal stash in off-shore accounts had been one of the biggest promises of Narendra Modi's 2014 poll campaign and one of the points that the government was cornered by the opposition in recent weeks.

So, in first full-fledge budget the Modi Government not only unveiled a slew of tough measures to crackdown on hidden assets, but also a brand new law that could attract up to 10 years of imprisonment. 

In fact, hard cash has been made a bad word, to disincentive use of cash, for any transaction-sale or purchase-above Rs 1 lakh, PAN details have to be furnished.

The rigorous and long prison term is also aimed at bringing down cash dealings and tax evasion in real estate and similar high-value transactions. 

Finance Minister Arun Jaitley announced-and it could be called one of the key points of Budget 2015-framing of new legislations to strike at the root of black money generation and stashing. 

The government, he said, will also take steps to incentivise use of credit and debit cards and putting a cap on cash transactions, while quoting PAN (Permanent Account Number) will be mandatory for all sale and purchase of over Rs 1 lakh, Finance Minister Arun Jaitley said in his Budget speech. In other words, even for buying one of those expensive LED/LCD TVs consumers have to declare their PAN number and no buying and selling of property without that number. 

"Quoting of PAN is being made mandatory for any purchase or sale exceeding the value of Rs 1 lakh. The third party reporting entities would be required to furnish information about foreign currency sales and cross border transactions," the FM said, delivering his first full-fledged budget. 

But, the thrust of his tax proposal seemed to be enacting "a new law to effectively deal with the problem of black money which eats into the vitals of our economy and society'' and "to this end'' he proposed "to introduce a Bill in the current Session of Parliament." 

Under the proposed law, Jaitley explained concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable with rigorous imprisonment of up to 10 years. 

In addition to prison term, the offence will also be made "non-compoundable" and "the offenders will not be permitted to approach the Settlement Commission".

So, no legal recourse if anyone is found to be on the wrong side of the fence.  Any moratorium, therefore, is out of question. On curbing domestic black money, a new and more comprehensive Benami Transactions (Prohibition) Bill will be introduced in the current session. 

"This law will enable confiscation of "benami" property and provide for prosecution, thus blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate," Jaitley said.  He also proposed to amend the Income-tax Act to prohibit "acceptance or payment" of an advance of Rs 20,000 or more in cash for purchase of immovable property. 

As for problems of poverty and inequity, the FM said, cannot be eliminated unless generation of black money and its concealment is dealt with effectively and forcefully. So, black money could be seen as the centre piece of all initiative to address financial woos. 

The proposed new law will entail penalty of 300 per cent for concealment of income and assets, while not giving offenders permission to approach the Settlement Commission. 

Also enforcement agencies will be given power to attach and confiscate unaccounted assets held abroad and launch prosecution against persons indulging in laundering black money.  Jaitley said the Foreign Exchange Management Act, 1999, will also be amended.  

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