Black and white

India has a law for almost every economic activity irrespective of whether it is carried out legally or otherwise.

However, implementation of these laws has been so patchy that experts say the government should focus on the implementation of existing laws rather than bringing new ones. The Mod government has been making a series of announcements on black money stashed abroad.

The latest in this series of announcements is the introduction of the Undisclosed Foreign Income and Assets (Imposition of New Tax) Bill, 2015, in the Lok Sabha, which has 88 Sections with Rules to follow.

The Bill seeks to tax any undisclosed income in relation to foreign income and assets under the Bill and not under the Income-Tax Act. Such income will henceforth be taxed at 30 per cent without any deductions or allowances.

The penalty for non-disclosure of income or an asset located outside India will be 90 per cent of the undisclosed income or the value of the undisclosed asset.

Failure to furnish a return on foreign income or assets or filing a return with inaccurate particulars will attract a penalty of ₹10 lakh.

Wilful attempt to evade tax on a foreign income or an asset, failure to furnish a return in respect of foreign assets and bank accounts or income, and filing a return which hides more than it discloses will be punishable with rigorous imprisonment.

These provisions will also apply to beneficial owners or beneficiaries of such illegal foreign assets.

The Prevention of Money Laundering Act is also being amended to include offences under this Bill.

With its focus on harsh penalties and imprisonment, it is apparent that the Bill seeks to invoke fear among persons having assets located abroad that they have not declared. The Bill says it is applicable to the whole of India. One of its provisions states that abetment or inducement of another person to make a false return or a false account or statement or declaration under the Act will be punishable with rigorous imprisonment of 6 months to 7 years.

These provisions would apply to banks also (a learning from the HSBC episode).

A glaring inconsistency in the Bill is that if the person abetting is located abroad, nothing can be done under the Bill as it is applicable only to India.

Another situation where the Bill could be found wanting is if the black money is generated in India but the account or asset holding the black money is in the name of a close non-Indian relative.

Though easier said than done, it is also surprising that the Bill is silent on bringing these assets back to India which was a pet theme of the government.

All the serious schemes that the government has initiated have had names. It is hoped that the lack of a name for this Scheme (Kaala Dhan Vaapsi Bill?) is not an indicator that the Bill has been introduced only for the purpose of introducing it.

The government has also indicated that it would introduce a benami transactions prevention Bill to tackle black money within India.

The generation and distribution of black money has evolved into an art form these days — a benami Bill can do little to prevent this.

What the government needs to do is take stringent action and publicise it against a proven case of black money generation and hoarding — without worrying about the pedigree of the persons involved.

Instead of worrying about ‘phoren’ black money, the government could look at the low hanging fruit — black money in India.

The writer is a chartered accountant

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