The Income Declaration Scheme (IDS) 2016 formally ended 30th September, 2016. It was part of the series of concerted efforts by this government in its fight against black money. Some pertinent points in the lead up to this scheme and the results of the IDS are :
- IDS was another step in the Government’s concerted fight against black money starting with the establishment of the SIT in its first cabinet meeting itself of the present government.
- Since then, over Rs. 8,000 crores of foreign black money has been assessed from the HSBC list with another Rs.4,100 crore disclosed through the compliance window for foreign black money.
- Over Rs. 56, 000 crores black money has been detected through search operations.
- The Mauritius Double Tax Avoidance Treaty, which had been a source of tax evasion, was successfully re-negotiated, plugging a long standing loophole which many thought would never be removed.
- The Income Disclosure Scheme, the latest in the Government’s package of measures, has resulted in declaration of over Rs. 65,000 crores of unaccounted money.
- This will yield a tax revenue of over Rs. 29,000 crore, or 0.2% of GDP. This will be collected partly this fiscal year and partly next fiscal year.
- This IDS, unlike its predecessor, involved payment of full normal tax plus a penalty of 50% of the normal tax; this government wanted to ensure that those who evade do not get any benefit and pay more than the honest tax payers. In the previous scheme only the normal slab rate alone (30%) was payable.
- In this scheme, those declaring assets had to value them at their current market value.
- In the previous scheme, those declaring their unaccounted money were given discretion to value their assets, like gold and real estate, at a back-dated value. Because of this, the scheme led to large scale undervaluation of assets. Therefore, though a tax of Rs. 9,700 crores was collected from a declaration of Rs. 33,500 crore, it reduced the growth rate of tax revenue in subsequent years.
- In the present IDS the declared amount of over Rs. 65,000 crores has come from 64,275 declarants—i.e. the average amount declared is about Rs. 1 crore per person. In the previous scheme, it was Rs. 7 lakh only, and the money came from 4.75 lakh declarants.
- By adding Rs. 65,000 crores to the ‘white economy’, the success of this scheme will have a multiplier effect, because this money can be used as collateral for getting credit of a much larger amount. Hence, this scheme will have an overall positive impact of several times the amount disclosed.
The fight against black money has been multi pronged, right from the very first day this government took office. The Income Declaration Scheme gave one last chance to evaders to join the mainstream. Many thousands did. Some still did not. They were warned. They were given time. Now they will have no reason to complain when action follows !
Note: This post has been tagged under the ‘Notes and Releases’ category.