Black Money in India has been a highly debatable topic since a decade. Rising levels of corruption in every sector of the country has resulted in generation of huge sums of black money. Another reason being the increase in amount of currency flow in the market and less usage of banking channel. Various small movements were run in the country by several NGOs to raise voice against corruption. The biggest movement was ran by India Against Corruption led by Shri Anna Hazare. Baba Ramdev also raised his voice against black money but his movement was crushed by the government then in power.
“It is estimated that around 500 billion dollars of illegal money belonging to Indians is deposited in tax havens abroad. Largest depositors in Swiss Banks are also reported to be Indians,” CBI director A P Singh in 2012
Income Disclosure Scheme
Various estimates came out during these movements and political discussions. One estimate disclosed as per “The Hindu”, black money has grown up to three quarters of the GDP of India. Source of the numbers were quoted to be the confidential report of UPA government.
After repeated efforts to bring back money from Swiss Banks, current NDA government chooses to adopt a tempting route to attract tax evaders. The Income Declaration Scheme 2016 was announced by Shri Arun Jaitely in his budget speech of February 2016.
“My dear countrymen, today I want to make a special appeal. To the people who have undisclosed income, the Government of India has given a chance to declare such income by 30th September. And so my dear brothers and sisters, this is a golden chance for you to disclose your undisclosed income.” – Shri Narendra Modi, Prime Minister of India
Key Highlights of the Scheme:
Last Date of Declaration – 30th September 2016.
Last Date of Tax Payment – 30th November 2016.
Rate of Taxation – 30% of undisclosed Income.
Rate of Surcharge – 25% of such Tax i.e. 7.5% of undisclosed Income.
Rate of Penalty – 25% of such Tax i.e. 7.5% of undisclosed Income.
Effective Rate of Taxation – 45% of the declared/undisclosed Income.
Effective Rate 45% or 31%
Theory of 31%
Big confusion was created regarding the effective rate of taxation due to misinterpretation of the rules. A theory came out:
- Declare income of Rs. 100 then
- Pay tax of Rs. 45 out of another source,
- Turn black money of Rs. 145 white by paying Rs 45 as tax
Source of Rs.45 will not be questioned i.e. effective rate of taxation being 31%
Theory of 45%
This theory proved to be a hoax as soon as a clarification came out vide official circular of the government of India which states that:
- Declare income of Rs. 100 then
- Pay tax of Rs. 45 out of the declared income of Rs. 100,
- Turn Black money of Rs. 100 white by paying Rs. 45 as tax
Source of Rs. 45 shall be the same else no immunity will be granted to the tax payer.
Therefore the effective rate of taxation stands at 45% and for those who have declared the Income using 31% theory shall revise their declaration before 30th September 2016. But you cannot reduce the income from Rs.145 as per 31% theory to Rs. 100 in your revised declaration.
We hope that citizens of India who posses huge sums of black money take benefit of the window and declare their Income as the Government of India is in a mood to take strict action against tax defaulters.
Recommended for you
1 Comment
Leave a Reply
This site uses Akismet to reduce spam. Learn how your comment data is processed.
Pingback: Holding 500 and 1000 Indian Rupee Notes? What u should do?