Black money bill passed; Govt warns those having illegal assets

A bill to deal with black money stashed abroad was passed by Parliament today with government warning those having such assets to utilise the 'compliance window' or have sleepless nights once the global automatic information exchange system comes into effect in 2017.

Finance Minister Arun Jaitley said in Rajya Sabha that the new law, with stringent provisions, will help "squeeze" black money even as he underlined that the option of 'compliance window', which may run for a few months, was not an amnesty scheme.

"The world is no longer willing to tolerate tax havens which thrive in secrecy," he said, just before the 'Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015' was approved by the House, two days after the Lok Sabha passed it.

Jaitley, however, made it clear that the new law will not cover those having amounts equivalent to Rs 5 lakh in bank accounts abroad, which may belong to students or those working there.

The compliance window will provide an opportunity to people to come clean by declaring overseas assets and paying tax and penalty totalling 60 per cent, Jaitley said while replying to a debate on the bill on the last day of the session.

The timeframe for the compliance window will be notified as part of the rules.
"It is a taxation which is being imposed on an asset or an income outside. Since the tax has been imposed for the first time, we are giving you a compliance period where you pay 30+30 per cent and then you can sleep well.

"And then also remember, if you don't use this compliance window now, time will run out because by 2017 there will be a realtime automatic disclosure of information taking place," he said.

The Bill, which seeks to unearth unaccounted funds and assets stashed by Indians abroad and provide for 120 per cent tax and penalty in addition to 10-year jail term, will become law after getting assent of the President.

The government has also armed itself to attach domestic property of equivalent value of such offenders.

Stressing that the new black money law was not "an amnesty scheme", Jaitley said it does not provide for waiver of tax. Instead it proposes tax, penalty and also prosecution.
Moreover, he said, "amnesty schemes also have a protection against naming and shaming... your identity will be kept secret. There is no such protection which has been granted."

The compliance window will give an opportunity for payment of tax and penalty, he said, adding "once the compliance window closes, you are going to be taxed very heavily."
Tax and penalty of 120 per cent, which will be imposed after the expiry of 'compliance window', means the "value of assets is gone," the Finance Minister said.

Responding to apprehensions expressed by some members about harassement of innocent persons by taxmen, Jaitley said, it will apply only to resident and will not cover prosessionals and Non-Resident Indians (NRIs) working abroad.

"Are innocents going to be harassed as a result of this? The answer is no," Jaitley said, adding "those who work abroad are not going to be covered. It is those who are resident taxpayers and assesses in India, and who keep unauthorised income outside are going to be liable under this Act."

He underlined that the black money law will deal with foreign assets and not the domestic tax evasion which was being taken care of by the Income Tax Act.

"If it is violation of keeping national assets outside the country...we have made it now a predicate offence, which is liable for an action under Prevention of Money Laundering Act (PMLA) and lead to attachment of equal amounts of (domestic) assets," he said.

Jaitley, while giving reasons for not announcing any tax amnesty scheme, referred to the Voluntary Disclosure of Income Scheme (VDIS) of 1997 and said although the government collected Rs 10,000 crore, the revenue collections dipped in the subsequent years.

Also, the Finance Minister added, the government had given an affidavit in the Supreme Court indicating that there would be no such amnesty schemes in future.

On demand of members for disclosure of black money holders abroad on the basis of list of such persons provided by foreign countries, Jaitley said it could be done only after prosecution was filed in the courts or else it would be violative of bilateral tax treaties.

He said that Germany and the UK have objected to the certain names provided by them appearing in media.

Once the agreement on global automatic exchange of information comes into effect in 2017, "we will not have to run after foreign countries but information will reach us here".
As regards the list of names of alleged black money holders provided by the governments of Germany and France, Jaitley said assessment have been completed in most cases and prosecution have been initiated.

The tax authorities had raised a tax demand of Rs 4,520 crore following assessments, he said, adding "in each one of those cases whatever steps have to be taken have been taken."
Responding to the suggestions for confiscating illegal properties of Indians abroad by enacting a law, Jaitley said that Parliament has no jurisdiction on other countries and "these are fanciful ideas" which may sound attractive.

Elaborating on the initiatives taken by the global community to promote automatic exchange of information, Jaitley said the US government has initiated Foreign Account Tax Compliance Act (FATCA).

If a financial institution does not comply with FATCA, it would have to pay a 30 per cent withholding tax on all its US revenues including dividend, interest, fees and sales. India is joining the agreement.

At the same time, G-20 group is working on puting in place a mechanism for automatic exchange of information. The initiative are likely to become operational from 2017.

Earlier, initiating the debate on the black money bill, E M Sudarsana Natchiappan (Cong) said though he supports the legislation, yet rectifications are needed in it.

He called the Bill a very "fragile" legislation and only an extension of the already existing Income Tax Act. He said the issue was not being addressed properly as was promised to the public.

R K Sinha (BJP) wanted intensification of checking on the Nepal border, which he alleged is used as a route for smuggling Chinese-made products into the country without any customs duty.

Ram Gopal Yadav (SP) wanted the Centre to disclose work done by the SIT constituted on blackmoney. He also urged the government to explore avenues to bring more people in the bracket of tax-payers through relaxations.

Anil Kumar Sahani JD(U) asked the Centre to exempt people with income less than Rs. 12 lakh per annum, which is the annual salary of a Member of Parliament including perks.
TMC leader Derek O'Brien attacked the government, saying it had failed in all promises made in the run-up to Lok Sabha elections last year.

"The Prime Minister (during the election campaign) had said that every rupee of blackmoney would be brought back and it would be spent for welfare measures," he claimed.
He also questioned BJP leaders who had promised to bring all the black money with 150 days after coming to power.

CPI (M) leader Sitaram Yechury said several amnesty schemes including the one on Non-Performing Assets have failed to yield adequate results in the past.

"This one-time amnesty is not going to work. It may turn out protecting them," he said, referring to provisions in the bill that those voluntering to disclose blackmoney details would attract certain penalities and taxes.

A Navaneethakrishnan (AIADMK), Satish Chandra Mishra (BSP), Bhupinder Singh (BJD), Praful Patel (NCP), Sanjay Raut (Shiv Sena) also spoke on the bill.

Leader of Opposition Ghulam Nabi Azad sought to pick holes in the bill, wondering if the government will be able to bring back the black money stashed abroad and seize assets.
Ram Jetmalani (Ind) launched a scathing attack on the government, saying it was not sincere in bringing back black money stashed abroad.

He said while the German side had agreed to share information on the account holders, the government did not show any interest nor signed the letter declaring its intent to bring back money stashed abroad.

He said that despite promises made during elections, the government has "ridiculed" itself on the issue and has gone back on the promises made.

Referring to the UN convention on black money, he said the government was not ratifying it to facilitate the exchange of such information though it is a signatory to it.

Opposing the bill citing loopholes in it, Jethmalani said he was the lone person in the House opposing the bill despite fighting to bring back ill-gotten wealth from abroad.

Pyari Mohan Mohapatra (Ind) said the passage of the bill would not be enough to check the menace of black money floating in the market.

He said like the "broom which the Prime Minister used to clean the garbage under the Swatch Bharat Abhiyan, the Finance Minister needs similar big brush to cleanse the system of such wealth".

D Raja (CPI) and Tiruchi Siva (DMK) also spoke.

Earlier, some members of Rajya Sabha raised questioned whether or not the black money bill was a 'money bill' or a 'finance bill.

Members from both the opposition and treasury benches cited rules to argue in different ways.

Deputy Chairman P J Kurien, who was in the chair, maintained that the Constitution is clear that on the matter of what constitutes a Money bill, the decision of the Lok Sabha Speaker is final.

However, members insisted that Rajya Sabha should take its own decision, independent of the Lok Sabha.

After arguments and counter-arguments, Kurien said he would convey the feelings of the members to Chairman Hamid Ansari.

As the House was about to begin a discussion on the Black Money Bill, Naresh Agrawal (SP) raised the matter about the rights and powers of the Upper House vis-a-vis money bills.
He said that present situation is such that most legislations could be termed Money Bills. A money Bill does not require the adoption or approval of the Rajya Sabha.

Kurien said it is entirely for the Speaker of the Lok Sabha to certify a Bill.
Sitaram Yechury (CPI-M) asked if the Upper House could suggest to the Speaker whether there should be criteria. "Can there not be a set of rules for that?" Yechury asked while adding that there are rules for everything.

Derek O' Brien (TMC) suggested that the House could set up a Committee which could examine the issue related to defining of Money Bills.

Union Minister Ravi Shankar Prasad said as per article 110(3) of the Constitution, the decision of the Speaker is final as to what constitutes a Money Bill.
Yechury suggested that the Lok Sabha itself can define the criteria for what constitutes a Money Bill. He said the Rajya Sabha could give its opinion. D Raja (CPI) suggested that a committee could look into the issue.

Sharad Yadav (JD-U) however was of the opinion that the decision what a money bill is the Speaker's prerogative and the system has been like that for decades now.

Ram Gopal Yadav (SP) referred to the British Parliamentary System and said that because of indifference, the upper house there, the House of Lords, had relinquished a lot of its powers.
Kurien finally said that though the Constitition is clear that Speaker is the final authority on what is a money Bill. Yet, he said, he will convey members' feeling to the chairman.

Later, just before Jaitley was about to move the Bill to curb black money, Azad said though his party supports the legislation, it was generally felt that this Bill has been made money bill to undermine the position of Rajya Sabha.

"I caution the Finance Minister that this should not be repeated in future," Azad said.