*Panel suggests cash curbs-*
Tax dodgers may have some reason to worry.
*The special investigation team (SIT) on black money has recommended two measures to curb the generation of black money in the economy: a complete ban on cash transactions above Rs 3 lakh and a cap of Rs 15 lakh on an individual’s cash holdings.*
The two suggestions form part of the fifth report that the SIT headed by Justice M.B. Shah has submitted to the Supreme Court. The SIT was constituted in 2014 under Justice Shah to look into ways to curb the generation of black money and bring back funds stashed overseas – an electoral promise that was made by Prime Minister Narendra Modi.
*The report submitted before the apex court said “there should be a total ban on cash transactions above Rs 300,000 and an Act be framed to declare such transactions as illegal and punishable under law”.*
While the government has not commented on the report as the issue is sub judice, it has placed abstracts of the report on websites and sought suggestions from the public on the recommendations.
While recommending a cap on cash holdings at Rs 15 lakh, the report said: “In case any person or industry requires holding more cash, it may obtain necessary permission from the commissioner of income tax of the area.”
However, chartered accountants said this was an impractical suggestion as many factories and mines had to keep large cash holdings because they had to pay workers in cash.
“Our clients often send cash by road and by air to meet requirements. This will only add to paperwork and a waste of man hours,” said Sudatto Sen, a leading Delhi-based chartered accountant.
*The SIT also suggested amending the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, by incorporating the provision that “undisclosed foreign income and assets would vest in the Union of India”.*
“Once it is held that under the law, property vests in Union of India, the person who is holding the said property outside the country shall have to prove that it was acquired legally and/or held after obtaining necessary permission from the RBI,” it said.
Citing the recent disclosure in the Panama Papers investigation, the panel said that unless there was a deterrent provision, it would be difficult to bring back the money stashed outside the country.
Some of the taxpayers named in the Panama Papers have claimed that they had obtained permission from the RBI before depositing the amount in foreign countries.
The SIT was, however, sceptical about the extent of disclosures and contended that assessees do not provide such information to the income-tax authorities.
In its report, the SIT suggested there should be a provision under the Income Tax Act that any transaction involving more than Rs 3 lakh shall be “invalid and illegal and would be a punishable offence, if the amount is not paid by account payee cheque or account payee bank draft or use of electronic clearing system through a bank account”.
Limits on cash transactions would discourage white-collar criminals or hardened criminals from money-laundering and dealing in unaccounted/black money, it said. “This would also discourage corruption to some extent.”
It also said that cash withdrawals of more than Rs 3 lakh from any bank account in a day should be considered a suspicious activity and the bank concerned should report it to the Financial Intelligence Unit (FIU) and the income-tax department, it said.
*”In addition, starting from the next year, all banks including co-operative banks be directed to notify any income or withdrawals of more than Rs 3 lakh to the directorate-general of income tax (investigation) authorities of the state and to the FIU,” it suggested.*
In the budget for 2015-16, the government had announced proposals to make it mandatory to quote PAN for all sale and purchase of goods and services where payment exceeds Rs 1 lakh.
However, it later decided to enhance the limit to Rs 2 lakh and also to revise the monetary limits of other PAN-reportable transactions.
Officials said that under directions from the Supreme Court, the government had implemented some of the committee’s recommendations.
These included offering a four-month black money declaration window that closes in September and offers citizens the opportunity to reveal undisclosed income from any sort of asset and escape criminal action. The disclosures will be taxed at 45 per cent of their value.
On Thursday, the government effectively extended the timeline for paying taxes and penalties on declarations by a year.
The government said those who would want to declare their ill-gotten wealth by September 30, when the scheme closes, can pay their back taxes and penalties in three easy instalments: 25 per cent by November 30, another 25 per cent by March 31, 2017, and the rest by September 30, 2017.