Report card: Modi government's fight against black money

Report card: Modi government's fight against black money

Courtesy : BS04/08/2018 09:50

Fight against black money was one of the key manifesto promises of the BJP for 2014 Lok Sabha elections. As a prime ministerial candidate, Narendra Modi had promised to bring back black money stashed in foreign banks.

In the last four years, the Narendra Modi government has taken a series of steps to check black money generation. Here is a report card of what all the government has done to combat black money as it prepares for 2019 Lok Sabha elections:

Black Money and Imposition Of Tax Act

The government has been able to recover black money of Rs 69,350 crore under the Income Declaration Scheme and Black Money and Imposition of Tax Act. Another Rs 5,000 crore was recovered under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act were enacted in 2015 providing a one-time window for declaring undisclosed foreign assets. Around 650 people declared money worth Rs 4,100 crore deposited in foreign banks.

Two more compliance windows were provided by the Modi government - the Income Declaration Scheme (IDS) and PMGKY in 2016. A total of 64,275 people disclosed Rs 65,250 crore under the IDS to be taxed at 45 per cent.

Assets worth Rs 5,000 crore were declared under the PMGKY to be taxed at 50 per cent with the condition of making an additional 25 per cent investment in a government bond for four years. The additional investment was to be refunded without any interest.

Demonetisation

No concrete outcome was achieved of demonetisation announced in November 2016. Critics consider demonetisation a failure. About 86 per cent or currency notes - all in Rs 500 and Rs 1,000 denominations - worth Rs 15.44 lakh crore were declared invalid in one go. All but Rs 16,000 returned to banks.

The Reserve Bank of India (RBI) spent Rs 21,000 crore in carrying out demonetisation and subsequent remonetisation. The final numbers are yet to be officially disclosed by the RBI. It is fair to say on available evidence that demonetisation did not meet the expectations of the government in wiping out black money from Indian economy.

Amendment To Benami Properties Act

Almost entire Opposition questioned demonetisation. Those who supported it - including Nitish Kumar of JDU - then in alliance with the Congress and the RJD in Bihar - demanded stronger Benami Properties law as a follow up to demonetisation in the fight against black money.

The Modi government amended the Benami Transactions (Prohibition) Act of 1988 in 2016. The Income Tax Department set up 24 dedicated Benami Prohibition Units across India. Minister of State for Finance Shiv Pratap Shukla said, "As on June 30, 2018, provisional attachments have been made in more than 1,600 Benami transactions involving Benami properties valued at over Rs 4,300 crore".

Blocking Mauritian Route

The government implemented Anti-Avoidance Rules (GAAR) that came into force on April 1, 2017 and signed in May 2016 the Double Taxation Avoidance Agreement (DTAA) with Mauritius, one of the biggest routes for money laundering and sources of black money generation.

The government can now tax capital gains from sale or transfer of shares of an Indian company acquired by a Mauritian tax resident. It is considered an effective step to block the Mauritius route of money laundering and black money generation.

Pact With Swiss Banks

The Modi government signed a pact with the Swiss National Bank in November 2016. The Swiss National Bank agreed to share account details of Indians with the Indian government from September 2019.

So, the next government at the Centre would be receiving details - such as name, account number, address, date of birth, tax identification number, interest, dividend, receipts from insurance policies, the credit balance in accounts and proceeds from sale of financial assets - of Indians stashing their money in Swiss banks.

The latest information on money parked in Swiss banks comes from a statement Finance Minister Piyush Goyal saying that the figure has dropped by 80 per cent since the Modi government came to power. The non-bank deposits have declined from $800 million in 2016 to $524 million in 2017. These deposits were $2.23 billion in 2014, he said.

Bigger Taxpayer Base

The number of taxpayers has doubled in the last four years. Tax collection has also seen nearly 50 per cent increase during the same period. There were 3.79 crore taxpayers in India in 2013-14. The number increased to 4.07 crore in 2015-16 and 6.84 crores in 2017-18.

The gross tax revenue has also been increasing consistently. It was Rs 12.44 lakh crore in 2014-15 which increased to Rs 14.60 lakh crore in 2015-16 and further to Rs 17.15 lakh crore in 2016-17.

Surge In Indirect Tax

Indirect tax collection till November 30, 2017, was at Rs 7.35 lakh crore as compared to full-year target of Rs 9.27 lakh crore. It was Rs 7.11 lakh crore in FY16 up from Rs 5.46 lakh crore the previous year.

Direct Tax Buoyancy Doubles

Since demonetisation, direct tax buoyancy has more than doubled from 0.6 times in FY16 to 1.3 times in FY17 and 1.7 times in FY18. Tax buoyancy is a measure of the responsiveness of tax receipts to economic growth and reflects an increase or decrease in government income.

The direct tax buoyancy had stayed between 0.5 and 1.1 times from FY08 to FY14. In FY15 and FY16, it was 0.8 times and 0.6 times respectively. But following demonetisation in 2016, the direct tax buoyancy has more than doubled from 0.6 times in FY16 to 1.3 times in FY17 and 1.7 times in FY18.

More Power To I-T Department

The I-T Department has detected undisclosed income worth Rs 13,376 crore. It is being seen as more efficient than earlier. The Income Tax Act was amended in 2017 making it easier for I-T sleuths to conduct a search and survey operation.

They are now not required to disclose their 'reason to believe' or 'reason to suspect' before conducting the raid. As a result of the amendment, total 12,526 surveys were conducted by the I-T Department in FY17 detecting Rs 13,736 crore. The corresponding numbers for the previous year were 4,428 and Rs 9,700 crore.

 

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