New Delhi: The Indian government’s much-hyped black money compliance window saw a tepid response with less than Rs.4,000 crore of undisclosed foreign assets being declared at the close of the three-month compliance window.
The government on Thursday said it received 638 declarations amounting to Rs.3,770 crore in undisclosed assets under the compliance window that closed on 30 September.
Bringing back black money stashed in overseas accounts was one of the major electoral promises made by the Narendra Modi-led National Democratic Alliance. The government enacted the stringent Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 earlier this year to deal with the menace of black money stashed abroad. It has provisions that can hold individual evaders and financial institutions abetting them with penalty and jail.
However, the government had provided a three-month window to evaders to come forward and make declarations and avoid jail by paying a lower tax and a penalty. A declarant has to pay a tax and penalty of 60% under the window against a tax and penalty of 120% along with jail for those caught by the tax department. Despite this relaxation, the declarations were much lower than what the government expected. It will only collect tax of around Rs.2,262 crore from these declarations.
The response was sub-optimal, said Rahul Garg, leader, direct tax, at consulting firm PricewaterhouseCoopers.
“People were concerned about the confidentiality of the information that they disclose. They needed more assurance from the government. Also, since you have to pay 60% of the asset value, it is very expensive to disclose,” he said.
After concerns were expressed by industry lobby groups and chartered accountants, the government had released two sets of frequently asked questions detailing the various possible scenarios. It had also reiterated that the declarants will not be subject to any harassment by the tax department. It had also promised that the names of those who disclose their income will not be made public.
The quantum of declarations puts to question the success of the black money law, Girish Vanvari, national head of tax at consultancy firm KPMG in India, said in a note.
“Expectations were of a much higher number. The low response can be attributed to uncertainty of the process and lack of clarity,” he said. “There is certainly a case for extension of the deadline for disclosure under the black money law.”
The government has reiterated that it will not extend the compliance window any further.
The assessees should have been made aware that non-disclosures would certainly come into light once the information exchange agreements signed by India become effective, which could lead to adverse tax consequences, penalty and prosecution, Vanvari said.
From 2017, India will start receiving financial information about its residents from other countries under the automatic exchange of information, a global agreement under the aegis of Organisation of Economic Cooperation and Development signed by more than 60 countries.