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Black money: Govt mulls amnesty for foreign account holders

Top officials of the CBDT and the ED have recommended to the government that those holding unaccounted money abroad should be allowed to bring back their funds with reduced penalties and granted immunity from prosecution.

S.P.S. Pannu | March 1, 2012 | Updated 08:58 IST

There is a serious move afoot to introduce an amnesty scheme for bringing back black money stashed in secret overseas bank accounts by Indian citizens. According to reliable sources, top officials of the Central Board of Direct Taxes and the Enforcement Directorate have recommended to the government that those holding unaccounted money abroad should be allowed to bring back their funds with reduced penalties and granted immunity from prosecution.

The amnesty scheme has been recommended exclusively for money kept abroad and does not include domestic accounts. The final call on the issue is expected to be taken by the finance minister and political considerations will have to be kept in mind. There is a section within the government which believes that dishonesty should not be rewarded and hence these assets should be taxed at 50 per cent if at all amnesty is granted.

The US approach in this matter is interesting. It compels US tax residents to come forth and declare their undisclosed offshore income under amnesty schemes and, thereby, collects much-needed revenues. At the same time, it manages to instill enough fear in the minds of US taxpayers, that going forward, the deterrent measures will be so strong against tax evaders that they would be ill-advised to continue the practice of non-disclosure of offshore income.

Business chambers have also requested the government to introduce an amnesty scheme to allow black money deposited in foreign accounts to flow back into productive investment. CBI director AP Singh had said recently that around $ 500 billion of illegal money belonging to Indians is deposited in tax havens abroad, and the largest depositors in Swiss Banks are also reported to be Indians. He had said at an Interpol conference that India, in particular, has suffered from the flow of illegal funds to tax havens such as Mauritius, Switzerland, Lichtenstein and British Virgin islands.

The Double Taxation Avoidance Agreement (DTAA) between India and Switzerland was revised in August 2010 and came into force on October 7, 2011. The revised treaty allows for exchange of information on tax fraud as well as on tax evasion cases. The earlier treaty did not include tax evasion, but only tax fraud. Swiss law makes a distinction between tax fraud and tax evasion.

The provisions of the revised agreement apply in India to income originating in tax years which start on or after April 1, 2012. This will make it difficult to get the money deposited earlier. The Income Tax Department is already investigating a list of 700 Indians having accounts with banks in Geneva after the government received information from the French government.

The government has not disclosed the names of persons who were being probed by the Income Tax Department in connection with stashing of unaccounted wealth in overseas bank accounts on the ground that the information has been received under a secrecy clause.

Members of Parliament's Standing Committee on Finance, headed by senior BJP leader and former finance minister Yashwant Sinha, wants the government to fast-track the prosecution proceedings against tax dodgers whose names figure in secret Swiss bank accounts. The parliamentary committee wants these names to come out in the public domain.

Finance minister Pranab Mukherjee had disclosed recently that the tax authorities have obtained close to 10,000 leads from foreign banks about suspicious overseas transactions involving Indian citizens. Information regarding Indians having overseas bank accounts has also been received under the Direct Tax Avoidance Agreement with France. In 69 cases, taxpayers have admitted to unaccounted income of Rs 397.17 crore on which taxes to the tune of Rs 30 crore have now been recovered.

The Indian authorities have also made over 300 specific requests for obtaining banking information from foreign jurisdictions. The investigation wing of the I-T Department has detected concealed income to the tune of Rs 3,014 crore in recent months of the current financial year through focussed searches on the basis of information received from foreign jurisdictions.

The minister said that as many as 81 tax treaties with foreign countries had been amended to enable the better flow of financial information and 14 tax information exchange agreements had been signed with four tax havens. A huge amount of black money is being generated through transfer pricing mechanism, which shows transactions taking place between a company and its subsidiary firms.

Courtesy: Mail Today 

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