Chance to get away with some hush cash

New Delhi: The Centre on Monday cracked open another window to enable holders of undisclosed cash to deposit the money in their bank accounts after paying an effective tax of 50 per cent and locking up a part of the sum for four years. The amnesty scheme - the Pradhan Mantri Garib Kalyan Yojana (PMGKY) - has been designed to give tax evaders a second opportunity this year to disclose cash that has become worthless after the demonetisation of Rs 500 and Rs 1,000 notes on November 8. The scheme will come into effect from a date the Centre will notify in the official gazette, finance minister Arun Jaitley said while introducing the Taxation Laws (Second Amendment) Bill in the Lok Sabha on Monday. Speculation had been rife since last week that such a scheme was round the corner but the formal announcement came only on Monday. The Opposition had already dubbed it the "new Fair and Lovely scheme, coming to convert black money into white" by paying a tax. Many reckon that the scheme will run till December 30, the last date for depositing the old notes with commercial banks. Revenue secretary Hasmukh Adhia said: "We will notify the last date after the bill is passed but it is likely to be December 30." Adhia said the tax department would not quiz the declarants about the sources of the funds deposited with the banks since November 10 if the entire income was declared and 50 per cent effective tax paid on the disclosures. The disclosures will enjoy immunity from wealth tax, civil and other taxation laws. However, there will be no immunity from the Foreign Exchange Management Act (Fema), Prevention of Money Laundering Act (PMLA) and narcotics and black money laws, Adhia added. The government said that declarations of other forms of undisclosed income - unexplained credit, investments, bullion and jewellery holdings, and other assets including hundi notes - would be taxed at an effective rate of 75 per cent, which includes a tax of 60 per cent of the amount and a 25 per cent surcharge. The assessing officer will have the discretionary power to slap a 10 per cent penalty on such disclosures, which could raise the effective rate of tax to 85 per cent. In June, the government had come out with a voluntary disclosure of income scheme (VDIS) - a black money disclosure window - that ran till September 30 and saw income disclosures of a little over Rs 65,000 crore. It was widely considered a failure, given the size and scale of unofficial estimates of black money swirling around in the country. The effective tax rate under the VDIS was 45 per cent, which means the tax rate is being bumped up by 5 percentage points under the new scheme. The cash declarants will have to deposit 25 per cent of the undisclosed income in a scheme, to be notified by the government in consultation with the RBI. This deposit shall bear no interest and the amount deposited can be withdrawn after four years from the date of the deposit. The tax, surcharge and the penalty will have to be paid before the filing of the declaration, the tax amendment bill said. The money from the scheme will be used for projects in irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood so that there is justice and equality, said the Statement of Objects and Reasons of the Bill. Adhia said the government might take more steps against black money after December and asked people to take advantage of the PMGKY scheme. He added that the search and seizure provisions had been amended to ensure that people were apprehensive about income-tax raids. The law will now be debated in the Lok Sabha and passed before the end of this week. Any amendment to the income tax act is treated as a money bill. This means that the Rajya Sabha, which is controlled by the Opposition, cannot reject or amend it. The Opposition could play spoiler and keep the bill pending for 14 days, which could partially defeat the purpose of the legislative amendment. The winter session of Parliament is slated to end on December 16 but that could be extended if needed. "I do feel this should have come along with demonetisation; then, the scheme would have earned more bang for the buck.... In any case, the main problem of the severe cash crunch that is paralysing large sections of society is yet to be addressed," said Pronab Sen, economist and former chairman of the National Statistical Commission. Banks have reported that the exchange and deposits from November 10 to 27 have amounted to Rs 844,982 crore. During this period, withdrawals from bank accounts and ATMs totalled Rs 216,617 crore.