The present Government got absolute
majority in last election because of the corruption issue. They also promised
to curb the black money and assured to get back the black money lying outside India.
In around two years of their tenure they have not got any breakthrough in this
direction. Opposition also cornered them from time to time for depositing Rs.
15 lakhs in each Indians account which they promised in election campaign. The
budget has now again tried to address black money issue and new disclosure
scheme is announced.
The Finance
Minister in his budget speech announced income declaration scheme, 2016 so that
Indian citizens can declare their undisclosed income and pay 45% tax. The total
comprises of 30% tax, 7.5% surcharge and 7.5% penalty. The scheme will give immunity
to assessee’s declaring black money from prosecution in future. This is another
opportunity for tax evaders to come clean and be a responsible citizen. The
government plan to open the disclosure scheme from 1st June to 30th
September’2016 with the option to pay amount due within two months.
We have seen many such disclosure schemes in past and among them VDIS
(Voluntary Disclosure of Income Scheme) of 1997 got a huge success and
collected record tax of around Rs. 10,000 crores at that time. It is also important to note that highest tax
slab of 40% was reduced to 30% in that budget. I have doubt whether the present
scheme will get the same response. The major difference is in 1996 scheme was the
tax liability was kept at 30% only and full waiver of interest and penalty was
given. The present scheme proposes to levy 45% tax on disclosed income which is
50% more compared to VDIS. To me this scheme will not get desirable response
because of 50% higher tax compared to previous scheme. If you ask me seriously
I will also not pay 45% tax if I had black money.
In the last
Budget also the government had announced similar disclosure scheme for
declaring undisclosed assets held broad. The response to that has not been made
public. To me this open and shut case and the Government is likely to get poor
response unless the tax rates are revised.
So is there any better option available
to curb the black money. Answer is yes if you think out of box and come out
with new innovative idea. I herewith propose one scheme for the kind
consideration of the finance minister. Instead of levying any tax on the
undisclosed income, Government should try to issue 0% Government bonds for a
period of 5 years against the disclosed income. The money is locked in for a
five years period without any interest on it and after the completion of five
years person disclosing the same will get full amount without any deduction as
white money in his bank account. The advantage to the Government is they will
not have to pay any interest on it and the advantage to person who is
disclosing the same will get 100% amount back after completion of five years. I
think this can be better option compared to asking to pay 45% on the disclosed
income.
Other option which is there since last
many years is the proposal given by Arthakranti. They propose to withdraw high
denomination currency notes and restricting cash transactions up to certain
limit. They also propose to change existing tax system and introduce transaction
tax on banking transactions. But I think nobody is serious about the same
because of the reason that large black money is with the politicians and bureaucrats
and they will never punish themselves.
As middle class Indian citizen I can only
dream of Achhe Din but in real life it’s never going to come. The budgetary
proposal of levying tax on EPF after retirement is classic example of the same.
We hope Government also looks at the middle class families who voted them to
power and try to tax rich people more in future.
