Please check your bank account for the credit of Rs 15 lakh. Hey, don’t be shocked. In the run-up to the Lok Sabha Elections 2014, the then Prime Ministerial candidate had made a promise of distributing Rs 15 lakh to every citizen. Rs 15 lakh was supposed to be your share of money that criminals of Indian society stashed abroad. The current Government promised to condemn anyone with black money. Later it was clarified that the promise of Rs 15-lakh was just “an illustrative statement”.

Is Government serious about recovering black money?
Like in many other economies, black money transactions are a major problem India faces today. A loss of revenue due to tax avoidance and dodging acts as an impediment to the progress of our nation. To clean up the system, the Government proposed a unique scheme in the Budget 2016-17. They stated the Income Declaration Scheme would allow an individual to disclose his/her black money by paying the tax at an aggregate rate of 45%. Moreover, the Government offered the assessee immunity against any prosecution under the Income Tax Act or under the Wealth Tax Act. However, there were some confusions about what classifies as black money; as well as what can be disclosed and what can’t be. The department seemed to be flooded with a whole host of similar queries. To address once and for all, the Central Board of Direct Taxes (CBDT) discussed some Frequently Asked Questions (FAQs) on the matter. Clarifications from the Department have brought forward some interesting aspects of the scheme that may completely change your perspective.

After careful analysis, PersonalFN has arrived at the conclusion that the Income Declaration Scheme may not receive the expected response as there are too many traps for black-money holders (who expect a red-carpet treatment from the Government). They seek absolute immunity—not just against the provisions of a couple of Acts. They need a safety blanket.

Why holders of black money may not come clean?

• Under the Income Declaration Scheme, money earned through illegal/corrupt means cannot be disclosed.
• As per the income tax department, the person will only be ineligible from declaration for those assessment years for which a notice under section 142(1)/143(2)/148/153A/153C is issued, and the proceeding is pending before the Assessing Officer. He/she is free to declare undisclosed income for other years for which no notice under above-referred sections has been issued.
• An Assessee cannot disclose any income under this scheme if the department has already revealed a search order in his/her name.
• The person disclosing capital assets will have to pay capital gains tax on the income received as capital gains at the time of sale. The date of acquisition would be considered on June 01, 2016 i.e. when the Income Declaration Scheme opens. Therefore, for the calculation of long-term gains, the actual date of acquisition would be immaterial.
• If the value of the asset is very high, the person disclosing it may not have adequate cash to pay a penalty. In that case, he/she would have to sell off such an asset.
• This Scheme does not protect the assessee revealing their undisclosed income from the prosecution, under sales tax or service tax or any other similar indirect tax—a significant deterrent.

PersonalFN is of the view that, the reasons discussed here will discourage black-money holders to infuse their money into the system. The Income Declaration Scheme appears too crippled to go the distance. If you are curious to know the response to the scheme, keep reading this space. Forget Rs 15 lakh, but there’s hope that at least 15 lakh people come clean, taking advantage of the Income Declaration Scheme.

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vishwasjipatil@gmail.com Jul 26, 2016 Such schemes in itself are deterrent for taxpayers. No one pays tax honestly and willingly. When one has successfully managed his black money for the last so many years, why should he fear? The fear comes only with assured imprisonment and heavy penalties for unearthed concealments on regular basis and from the System detected cases. No tax officers are honest since the time immemorable. All schemes of Jaitley are just hoax or he must be really dumb, being dumb hidden behind empty oratory skills.
vipul.jasani@lubrizol.com May 27, 2016 Hello, Whenever any Govt says "Recovery of black Money" or we will punish people who has black money" then take it for sure that they are not serious about it. Except Govt. everyone knows that huge black money is with politicians, govt employees where there is huge scope of corruption, big real estate players. One of the major reason of black money getting produced is "FAULTY TAX POLICIES AND RULES"  Recently I read in news paper that court allowed to scrutinize the income of Amitabh Bacchan in year 2006!!! This is ridiculous. For inefficiency of Income Tax dept, tax payers are getting harassed for keeping all records for 6 years. In recent news in Business standard (in May 2016), one tax payer showed income of Rs.1.62 crore as Long term capital gains with all the proofs. Even then IT dept rejected it and asked for paying tax with penalty. Finally matter went in first court and tax payer won the case. IT dept went in next higher court. during this time tax payer became ready to pay tax just to buy "peace". FORTUNATELY IT dept rejected it and went to higher court. In higher court also tax payer won the case. Now my point is that what punishment is there for IT dept to harass this tax payer!!! Many people do not have knowledge of various complicated rules of tax system and get caught in trap. Rules are made in such a way that increases the corruption and hence black money. GOVT OF INDIA ITSELF IS RESPONSIBLE FOR BLACK MONEY IN THE COUNTRY.    In my suggestion and opinion, Govt should not focus on recovery of black money. Instead they should focus on simplification of tax structure and implement ways and means to stop black money gets produced. Thanks, Vipul.

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