The Indian Black Money Saga

Black Money (Undisclosed Foreign Income & Assets) & Imposition of Tax Act, 2015 Act aims to curb black money or undisclosed foreign assets & income & imposes tax & penalty on such income Passed by both Houses of Parliament Received assent of President of India on 26 May 2015 Came into effect from 01July 2015 Allows levy of tax in India on assets kept abroad Act Includes ◦ Provisions to deal with problem of Black money that is undisclosed foreign income & assets ◦ Procedure for dealing with such income & assets ◦ Provides for imposition of tax on any undisclosed foreign income & asset held outside India ◦ For matters connected therewith or incidental thereto

Declaration of Foreign Assets One-time 90-day compliance window provided to holders of undeclared foreign assets ended September 30 Provided an opportunity to foreign assets holders to declared assets Payment of a total of 60% tax & penalty & escape stringent provisions of new Black Money law

The Penalty Law provides for a compliance window for declaring & paying penalty Failure to meet compliance timeline will attract an additional penalty of 90 % for a total tax liability of 120 percent on the quantum of black money stashed abroad

Black Money Amount Declared Government collected Rs 4,147 cr during black money disclosure compliance window Revised figure took into account declarations that came via envelops This is higher than previously announced amount of Rs 3,770 Previous amount announced was based on a preliminary count Total number of disclosures remains 638 Total tax receipt from black money declared during window would be Rs 2, crores

Help from Foreign allies to dig deeper into Black Money data India has found global allies in its fight against black money Germany, France, Switzerland, Singapore, Mauritius & the British Virgin Islands are among those providing information or will soon start doing so Information will be on assets held by Indians to help crack down on unaccounted wealth Freer exchange of financial information is possible due to accords such as Foreign Account Tax Compliance Act (Fatca) with US

G20 Brisbane Summit At G20 nations Brisbane summit leaders endorsed a new global transparency standard Standard states allows more than 90 jurisdictions to automatically exchange tax information A common reporting standard to automatically exchange tax information should be effective by

Present Black Money Situation in India Finance Minister Arun Jaitley justifiably pointed out that bulk of black money was within India Multiple mechanisms are in existence which create & perpetuate black money Black money is also allowed to move into India through various mechanisms

Is the Government’s move to curb Black Money Justified? Government has insisted on a strong approach to black money However government might have chosen wrong ways to go about curbing the menace Government has imposed harsh & severe laws that give too much power to the already intimidating taxman Structural as well as legal & policy changes are needed Changes in structure & policies may minimize creation & transfer of black money The executive & regulators have fallen short

Conclusion Need to minimize India's black economy is urgent However focus should be on regulatory & policy fixes With effective information-sharing ability of Indians to hide their assets overseas will disappear fast Like US, India should negotiate with tax havens better to secure past information From 2017, most countries will automatically exchange information on tax-evaders India will be able to establish audit trails on complex deals in future Government should also mandate companies to identify their real owners & make the registry public We must pull out all the stops to fight black money

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