The government on Monday introduced a new bill in Parliament that sets the terms of what is effectively a new income declaration scheme for black money holders, two months after the end of the previous “last chance” to come clean. The Taxation Laws (Second Amendment Bill) allows citizens to declare unaccounted income under the new Pradhan Mantri Garib Kalyan Yojana. Through a combination of tax, penalty and a surcharge on top of the tax, this income will essentially be hit with a 50% charge. Additionally 25% of the disclosed income will have to be placed in an interest-free deposit scheme for four years.
The main aim of the new rule is to plug the loopholes in the current taxation law that would have allowed black money holders to simply declare unexplained income in advance tax returns this year and attract taxes without any penalty. In fact, the most recent figures of money deposited into banks following demonetisation, coupled with various moves to limit cash exchange options, suggest the government is seriously concerned that those with illicit funds have managed to deposit it – in the hopes of turning the money white – without a major hit.
Those who are found with unaccounted money without declaring under the Pradhan Mantri Garib Kalyan Yojana will be hit with taxes and penalties amount to about 75%. The taxation laws are retrospective, covering this entire fiscal year and any advance tax returns filed so far, although the government has taken pains to insist that they aren’t technically so because the year is still on-going.
For all the government’s vilifying of black money holders then, with the government calling it a “crime against humanity”, it has given them yet another chance to return to the system. To add to the narrative that the entire demonetisation effort has involved suffering for a better future, the government has directly grafted a pro-poor scheme to the declaration scheme, so that it cannot be accused of simply giving the black money holders a legal way to launder cash.
After the mixed results of the previous income declaration scheme, and the clear indication that those with illicit cash were finding ways around the demonetisation move, the question remains: Will black money holders play ball?