New Delhi: To prevent people from using illegal ways to convert their unaccounted money after the demonetisation of Rs 500 and Rs 1,000 notes, the government proposed a new amnesty scheme for black money in Parliament on Monday.
Under the proposed Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana 2016 (PMGKY), all those who voluntarily declare their black money in cash and bank deposits will have to pay 50 per cent taxes (tax, surcharge and penalty) and 25 per cent of the total income declared will be “locked” for four years. The money will be “locked” in an interest-free deposit scheme for four years, to be notified by the Reserve Bank under the Pradhan Mantri Garib Kalyan Deposit Scheme 2016.
This amount is proposed to be utilised by the Centre for irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood, among others, “so that there is justice and equality”.
In case a person doesn’t declare his/her unaccounted money post-demonetisation and income-tax sleuths come to know about such cash deposits, the person will have to pay upto nearly 85 per cent in taxes under the proposed amendment.
Finance minister Arun Jaitley on Monday introduced the Taxation Laws (Second Amendment) Bill 2016 in the Lok Sabha to ensure that people who defaulted on their taxes were subject to tax at a higher rate and stringent penalty.
The Centre said in the wake of demonetisation, there have been suggestions from experts that instead of allowing people to find illegal ways of converting black money into black again, the government should give them a chance to pay taxes with heavy penalty and allow them to come clean. This will also ensure that “not only the government gets additional revenue for undertaking activities for the welfare of the poor, but also the remaining part of the declared income legitimately comes into the formal economy”.
The government has also amended relevant provisions to introduce a much higher penalty in search and seizure cases. Under the amendment to Section 271AAB, the penalty will now be 30 per cent in case a person admits to having unaccounted income during search and seizure and is ready to file returns and pay taxes. It is currently at 10 per cent. The penalty would be 60 per cent in other cases. The search and seizure provisions have been amended to ensure there is fear among people about I-T raids. There were instances that since 10 per cent penalty was to be paid if unaccounted income was admitted at the time of seizure and returns were filed and taxes paid, people used to accept black money at the time of seizures. The government felt the 10 per cent penalty provision was not enough of a deterrent and evaders were misusing it, so there was need for a more stringent provision.
Revenue secretary Hasmukh Adhia said the tax officials would not ask about the source of funds deposited in the banks from November 10 if the entire sum was declared under the proposed amnesty scheme. He said disclosures would enjoy immunity from wealth tax, civil and other taxation laws, but there will be no immunity from FEMA, PMLA, narcotics and black money laws. “The deterrent provisions were necessary so that people have the fear of hoarding black money,” Mr Adhia said. Deposits which have already been made from November 10 will be covered under PMGKY. “The last date will be notified after the bill is passed, but it is likely to be December 30. PMGKY will come in as a new Chapter 9 in Finance Act 2016,” he added.
Mr Adhia said this was not a retrospective amendment as the financial year was still on and people had not filed their tax returns yet. The revenue said the government will take more steps against black money after December and urged people to take advantage of the PMGKY scheme. It will be notified by the RBI in due course, he said.
