If the previous NDA regime’s Prevention of Terrorism Act (POTA) became an instrument of misuse and human rights violations by the authorities, new laws outlined in the budget to fight black money threaten to put similar unbridled powers in the hands of enforcement agencies.
Concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable with punishment of rigorous imprisonment (RI) up to 10 years, and offenders will not be permitted to approach the Settlement Commission; those caught concealing income and assets will be penalised at 300% of the tax due. And not filing returns or inadequately disclosing foreign assets in those returns could result in seven years’ RI.
The measures evoked a strong response from industrialists and Opposition alike.
“The black money law is draconian with imprisonment even for minor transgressions, and it will be a source of harassment. It will also turn out to be ineffective in the absence of sophisticated information gathering systems,” said Mohandas Pai, former finance head of Infosys.
Manish Tewari, senior Congress leader and Supreme Court lawyer who deals in tax matters, said, “It’s simply the re-introduction of FERA. It is, in fact, far more draconian than FERA. It is going to put a huge amount of power in the hands of the Enforcement Directorate, which is really not known for its outstanding probity. But the fundamental question is: If you are sincere in your intention to unearth black money, why this distinction between black money stashed abroad and in India?”
Jaitley announced another proposed law — the Benami Transactions (Prohibition) Bill — to fight black money at home. The bill will be introduced this Parliament session.
“This law will enable confiscation of benami property and provide for prosecution, thus, blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate,” he said.
Changes in income tax laws will be made so that, effective June 1, all transactions such as loans or deposits or advances for transfer of immovable property are done through an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of the loan or deposit is Rs 20,000 or higher.
Jaitley also raised the outlay for the special investigation team (SIT) on black money by nearly 10% to Rs 45.39 crore to help expand its infrastructure and logistics procurement capabilities.
Union Budget proposed law — the Benami Transactions (Prohibition) Bill — to fight black money at home. Finance Minister Arun Jaitley talks tough action
States to be equal partners in economic growth; move to making India cashless society; social sector programmes to continue.
Full Speech of Finance Minister
Stock market participants gave thumbs up to the Union Budget 2015, with some terming it as “dream budget”, following promise of lower corporate taxes and deferral of GAAR. “Overall it was a dream budget. Corporate taxes down, GAAR postponed, crackdown on illegal money, wealth tax abolished. Major takeaways from the budget 2015 were high stress on Make in India, rural development this will surly bring a surge in job creations.
Arun Jaitley, Indian finance minister, announced a panoply of economic and tax reforms and promised billions of dollars of investment for infrastructure in the first full budget of the Narendra Modi government since it was swept to power in last year’s election.Pledging “change, growth, jobs and genuine, effective upliftment of the poor”, Mr Jaitley told parliament on Saturday he had stuck to the existing 2014-15 budget deficit target of 4.1 per cent of gross domestic product, but would delay achievement of the 3 per cent target by a year and meet it only in 2017-18, to boost investment. “The credibility of the Indian economy has been re-established,” he said to the supportive thumping of desks by the Bharatiya Janata party members of parliament who dominate the lower house, as he outlined the Rs17.8tn ($288bn) budget for the year to end-March 2016. “The world is predicting that it is India’s chance to fly.”
To the delight of business, Mr Jaitley said a nationwide general sales tax (GST) system – “a state-of-the-art indirect tax system” – would be put in place by April 1 next year, replacing a jumble of local fees and taxes that prevent India from being a single market for goods and services.“GST is expected to play a transformative role in the way our economy functions,” he said.
Other tax changes included a plan to cut the nominal corporate income tax rate from 30 to 25 per cent over the next four years while simultaneously reducing the number of exemptions, and the replacement of a low-yielding wealth tax with an additional 2 per cent income tax surcharge on India’s super-rich.Mr Jaitley also announced a crackdown on “black money” held abroad, and said tax evasion on foreign assets would be punished with up to 10 years in prison.“Simplification of taxes… curbing black money – all these things improve India’s image,” said Ajay Shriram, president of the Confederation of Indian Industry, holding out the hope that India would cast off its reputation for “crony capitalism” and become more like Singapore.Mr Modi was elected on a promise to develop India’s struggling economy by creating jobs in manufacturing and infrastructure, and Mr Jaitley announced the creation of a National Investment and Infrastructure Fund to be financed initially with an annual Rs200bn from the government.There would also be tax-free infrastructure bonds for road, rail and irrigation projects, and the Rs1tn launch of five new “ultra-mega power projects” of 4,000MW each that would be auctioned once all regulatory approvals were in place.Other measures that could help investors include a phased extension of the so-called “visa on arrival” scheme to 150 countries from 43 today, and a proposal to end the distinction between different types of foreign investments – portfolio and direct – when enforcing limits on foreign ownership of Indian assets.Mr Jaitley also continued to devote government funds to numerous schemes for India’s poor, and said the government would move towards a universal social security system for all citizens.Business leaders, who had high expectations of a reformist budget, were broadly satisfied by Mr Jaitley’s statement, although they expressed concern about the lack of detail and whether the government would have the funds to fulfil its promises.Another concern is that opposition control of the upper house of parliament is blocking various reforms, particularly the BJP’s attempt to make land transactions easier for investors in industry and infrastructure.“The key thing is going to be the implementation of the infrastructure budget, which of course is tied in closely with the land law which is again up in the air,” said Atul Punj, chairman of Punj Lloyd Group, the conglomerate. “The money is not the issue. The ability to utilise the money will be the issue.”
Kiran Mazumdar-Shaw, who heads biotechnology group Biocon, said: “I think the government now is very serious about two concerns: investment and jobs. You can see that right through this budget.”