The Big Picture – Black Money Law: Will it act as a deterrent?
Summary:
Much has been discussed and debated about black money within the country and abroad for some years now. The NDA government came to power with a promise to bring black money stashed away abroad. The government has managed to pass a law in both the houses of Parliament which is aimed at curbing and punishing those who hold illegal foreign assets and income. Known as Black Money Bill it seeks to curb and punish people who conceal their foreign income and assets. The legislation has harsh punishment including rigorous imprisonment up to 10 years and penalties can go up to 3 times of the tax in case of repeated offenders among others. The act also seeks to give one time opportunity to those who have already concealed income and assets to come clean. However, concerns are being expressed about certain provisions of the Bill apart from its efficacy.
The Bill does not speak anything regarding tracking the black money. This is said to be the biggest lacuna in the Bill. The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015 also known as the Black Money Bill does not have provisions to deal with domestic illegal assets and cash held on Indian soil. According to the provisions of the Bill those declaring unaccounted income or assets will pay a flat 30% tax and a similar penalty in return for not being prosecuted. The Prevention of Money Laundering Act is also amended to help tax authorities pursue recovery through domestic assets as well in cases of those caught with overseas assets under the new black money law. The bill provides for the attachment of domestic property of those on the wrong end of the foreign assets law. The government is also planning to bring a law on Benami properties. Those abetting in stashing wealth overseas, including tax advisors, financial advisors, banks and financial institutions, will also face jail terms of up to seven years.
Experts say that the law will enhance the ability to trail the original source of funding and even attach properties even though the original owner can escape the law by stating that the property doesn’t belong to him. Several thousands of such benami transactions are pending action due to loopholes in the law, but the revised Bill has given more teeth to it for confiscation of such properties and curb generation of black money in the real estate sector, which is the root cause of unaccounted money in the system. As of now, experts point out, 35% of land deal and high end properties are transacted in cash and balance 65% through legal channel. The bill will discourage the cash transaction and lead to a correction in property prices that have artificially soared.
