The government has offered black-money holders three more months, starting from Saturday (today). The Pradhan Mantri Garib Kalyan Yojna (PMGKY), which was announced earlier, will formally open on Saturday and close on March 31, 2017. The Centre also created an email id –blackmoneyinfo@incometax.gov.in – which can be used to report information on black money.
The PMGKY will be the last chance to black-money holders to come clean, according to the Central Board of Direct Taxes (CBDT) Chairman Sudhir Chandra.
The scheme came into force with the notification of the Taxation Laws (Second Amendment) Act, 2016, and the Taxation and Investment Regime for PMGKY, 2016, on Thursday (or Friday?)
A Finance ministry note clarified that the income declared under the scheme would not be included in the total income of the declarant under the Income-Tax (I-T) Act for any assessment year. It would also not be admitted as evidence under any other Act like the Central Excise Act, Wealth Tax Act, Companies Act, etc. However, it offers no relief from criminal proceedings.
Revenue Secretary Hasmukh Adhia on Friday said that the government did not want to resort to "inspector Raj" and would prefer black money depositors to voluntarily reveal their unaccounted incomes that have found their way into the system.
"We have information from FIU (Financial Intelligence Unit) on how much deposits have been made in dormant accounts, Jan Dhan accounts, urban cooperative banks, and how much loan repayments have been made in cash, and RTGS transfers and also on withdrawals," he said.
The government has seized Rs 393 crore in cash and jewellery in the recent raids throughout the country.
In a clear warning to tax-evaders, Adhia said: "Mere depositing of money in bank accounts do not make it white. People should not make the mistake of thinking cash deposited in bank is white".
CBDT Chairman Sudhir Chandra cautioned black-money holders that the government had its hawk eye trained on them. "Everybody should be very clear that their deposits are being monitored and we are working on this data. Therefore, they should come very very clean under this scheme, which is the last window available for any taxpayer".
Tax experts feel that the scheme could have come as a second thought by the government after its hopes of around Rs 3-4 lakh crore of the Rs 14.80 lakh crore of demonetized Rs 500 and Rs 1,000 not returning to circulation were dashed.
"That expectation has turned out to be incorrect because, until two days back, Rs 12.5 lakh crore has come back as deposits in banks. Now, the government is expects the entire money will to return. If that happens, it will not benefit the country. Therefore, they are now proposing to tax the income that people may have already deposited to get some gains from demonetization," said a tax expert, who spoke on condition of anonymity.
Shailesh Kumar, Director (direct taxation, Nangia & Co), said that the scheme emphasised the government's aim to widen its tax base. Rakesh Bhargava, Director, Taxmann, said that PMGKY is the only option left now for tax-evaders. Any detection of unaccounted income thereafter would attract tax ranging from 83.25 per cent to 137.25 per cent.
How PMGKY works
Black-money holders have been offered confidentiality and immunity from prosecution if they declare their unexplained bank deposits of banned Rs 500 and Rs 1,000 notes and pay 49.90 per cent tax, surcharge and penalty (30 per cent tax on undisclosed income, 33 per cent surcharge on tax and a 10 per cent penalty on income) during the specified window.
Besides the levies, the declarant would have to mandatorily put 25 per cent of the undisclosed income in the PMGKY Deposit Scheme 2016, which is interest-free and has a lock-in period of four years.
Those who would miss this opportunity to come out into the open with their undeclared incomes would be liable to tax, surcharge and cess of 77.25 per cent of the income, if declared in income tax returns.
And, if it went undeclared even in the tax returns then there would be a further penalty 10 per cent on tax, "followed by prosecution".
This scheme has come into force with the notification of the Taxation Laws (Second Amendment) Act, 2016 and the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016 (the Scheme) on Thursday.
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