Modi’s black money haul emerges a Victor

PM Modi's War on Black Money: Superflop or Super Success?

What comes as an excellent piece of news for the Modi Government, Finance Minister Arun Jaitley has announced that 64,275 declarations under the IDS (Income Declaration Scheme), which was open for four months and closed day before yesterday on the 30^th of September, 2016, have been made amounting to 65,250 crore. This amounts to an average of approximately 1 crore per declarant. The Centre will earn tax revenues of 29,362 crore from the current declarations. Complimenting Jaitley, Revenue Secretary Hasmukh Adhia and CBDT Chairperson Rani Singh Nair for their sincere and tremendous efforts, Modi tweeted saying “I compliment all those who chose to be tax compliant in IDS-2016. This is a great contribution towards transparency and growth of the economy.” Finance Minister Arun Jaitley said, “It is an important step towards more and more becoming tax compliant." Once the declarations are verified, the number of declarants is expected to go up. Of the 29,362 crore in tax revenue, 14,700 crore will flow in to the coffers of the Government by March 2017, and the rest during the next fiscal year. The total number of declarations and the black money unearthed has surpassed the Centre’s expectations, and has given credit to the government which faced criticism from the opponents during the initial muted response. While Mumbai came a close second in the declaration of undisclosed wealth, Hyderabad and the two states of Telangana and Andhra Pradesh notched the top position of maximum declarations, with a company coughing up 150 crore of undisclosed money. Income Declaration Scheme 2016 With the aim of unearthing black money, the NDA Government came up with the IDS Scheme during the Budget 2016. IDS 2016 has the following features to encourage persons with undisclosed assets and wealth to step forward to pay tax:

Any citizen of India could declare undisclosed wealth.
Anyone who is non-compliant could come clean by paying a tax of 45% on the undisclosed income.
The 45% includes a tax of 30%, a surcharge of 7.5% and a penalty of 7.5%.
Every person availing of this scheme would receive immunity from prosecution.
Those who have availed of the Income Disclosure Scheme can pay the amount in two instalments up to September 30, 2017.
The IDS came into effect from June 1^st, 2016 and closed yesterday on the 30^th of September, 2016.

VDIS ( Voluntary Disclosure of Income Scheme) vs IDS ( Income Disclosure Scheme) The Voluntary Disclosure Scheme, 1997, introduced while P.Chidambaram was the Finance Minister had the following features:

Under VDIS, the tax payable on the declared amount was at the rate of 35 per cent in case of companies and firms, and 30 percent in the case of others.
VDIS was successful and the income declared under the scheme was 33,000 crore.
However, this success was at the cost of the tax revenue earned by the government because the real value of the assets declared was double the value considered for tax purposes and taxes were paid at less than 50% of the normal rate, with zero interest and penalties.
The proceeds from the VDIS were also to be accrued to the State Givernments with the Centre receiving a share for financing the basic minimum services programme, and building infrastructure.
As per reports VDIS could have attracted 60,000 crore declaration rather than the 33000 crore that was actually declared.

At the time of the introduction of Income Declaration Scheme during Budget 2016 by the current Finance Minister Arun Jaitley, the decision of the Government to charge a penalty from the tax defaulters did come under speculation and criticism both from the Media as well as the opposition. The Scheme saw a slow start when the media started reporting the negligible response, and suggested that the high rate of 45% tax including surcharge and penalty was acting like a deterrent. Tax experts also believed that the scheme would only get muted response on fears of falling foul of laws other than the Income Tax Act and the Wealth Tax Act. Experts also felt that in case of assets, if the value is too high, the person disclosing it may not have adequate cash to pay a penalty. In fact while owners of roadside eateries in Mumbai have declared 50 crore approximately in cash and property under the IDS 2016, lawyers of many of the owners the eateries have advised their clients to just blow away the money instead of paying the tax, fearing future harassment. There was another problem that the owners of many eateries faced. While they had high net worth, they held it in the form of properties. A tax adviser said, “You can’t expect people to sell property worth millions Even with all the speculations and criticisms, IDS 2016 has tasted success by recovering 65,250 crore of black money. The Scheme was drafted to benefit the government, and thus eventually the country, instead of giving hefty discounts to defaulters and rewarding dishonest tax-payers. At that time Jaitley accepted that it was a monumental income tax law change but also said, “Inequality between tax payers arises in amnesty. You have to pay penalties for not paying tax on time.” “This scheme is intended to bring some money from outside the system into the system.” he said. Conclusion The credit for the successful recovery of such a large amount of black money certainly goes to the political will of the Modi Government as well has the hard work put in by the officials of the Income Tax Department. With the Goods and Service Tax regime slated to be implemented in 2017, tax evading is going to be very difficult. This clause saw a last minute rush to file Income Tax Returns by many of the tax evaders. Now it is time for the government to step up the process of a crackdown on persistent tax-evaders. This will send a positive message to the honest tax-payers that the Government is with them and is ready to punish the guilty. The best reward for honesty would be tough action on the guilty. Read More... After Note Ban Be Ready for ‘Benami’ Axe

Modi’s black money haul emerges a Victor

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