Half-hearted amnesty

Unlike earlier, no one can now complain that the Government is not doing its bit in going after black money. Tax raids are back with a vengeance and the Income Tax Act is being amended with gay abandon to penalise taxpayers who have not disclosed all their income. While foreign black money has quietly faded into oblivion, the war is now against domestic black money.

Garib Kalyan Yojana Pradhan Mantri Garib Kalyan Yojana (PMGKY) is the label that has been given to what is in essence another version of the Income Disclosure Scheme (IDS). Erring taxpayers have another opportunity till March 31, 2017 to report their previously unreported income. Such income would be taxed at 50 per cent and a minimum of 25 per cent of the income would be locked in a deposit account for four years with no interest. If this Scheme is not availed of, the tax outgo would be 77.25 per cent or 87.25 per cent depending on whether this has been disclosed in the return of income or not. There are various penal provisions ranging from 30-200 per cent that continue to be applicable.

Will PMGKY rake in the moolah for the Government? The scheme has a couple of advantages. It provides a window for those who ignored the earlier disclosure scheme.

It is also a fact that demonetisation, frequent tax raids and notices from multiple regulators have instilled an insecure feeling amongst those who have not come clean on their income;PMGKY provides them an opportunity to do so.

However, the tax rate of 50 per cent could be a deterrent for the success of the scheme – one of the factors for the IDS getting a lukewarm response was the 45 per cent tax rate. Yet another dissuading factor could be the fact that the locked-in deposit earns no interest; taxpayers wanting to declare would consider this an opportunity loss.

Also, the fact that penal provisions would continue to apply could force many to think that there is nothing in the scheme that excites them. Though the previous IDS Scheme indicated protection from harassment, there have been instances where tax has been paid but the payer has been hounded with notices from every possible regulator.

Political exception The Government needs to assuage the fear factor that has been created. It should provide detailed instructions to their officers not to needlessly harass those who abide by the rules of both demonetisation as well as PMGKY. If there are no carrots or sweeteners but only sticks, responses to tax schemes are usually lukewarm.

It would probably be a good idea for the Central Board of Direct Taxes to relook at the PMGKY Scheme with a lenient set of eyes. There are enough and more provisions in the Income Tax Act to extract taxes once they come into the system.

However, the Revenue Secretary’s statement that the tax department would not go after political parties dilutes the entire intention of the Government. Despite all its battles against black money, the Government itself appears to be providing a parking place for tainted money.

Donating or parking unaccounted money to a political party may well be a perennial and indirect income disclosure scheme with no tax implications. If so, why show interest in a bond for 25 per cent of unaccounted money or income with a lock-in of four years that pays no interest?

The writer is a chartered accountant

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