The war on black money that has been raging since November, pitting income tax officials against tax offenders, is far from reachingadecisive turn.
The latest battle in this war is being fought through two schemes: the Pradhan Mantri Garib Kalyan Yojana and Swachh Dhan Abhiyan.
In addition,agrace period has been offered for nonresident Indians and those who were abroad from November 9 to December 30: they have time till March 31 to deposit their old currency notes with the Reserve Bank of India.
According to provisional estimates, 94 per cent of the demonetised Rs.500 and Rs.1,000 notes, collectively worth Rs.15.44 lakh crore, have been deposited with the banks.
If these figures are indeed the final numbers, it would mean the black money drive hasn´t achieved what the government had hoped for.
Hence, income disclosure schemes have followed.
While people are being encouraged to voluntarily disclose their wealth, advance analytics is also being used to catch the offenders.
The first to come was the Pradhan Mantri Garib Kalyan Yojana (PMGKY), also known as Income Declaration Scheme II, in December to give people an opportunity to voluntarily declare their unaccounted money.
Under the scheme, open till March 31, half the money of declarants will be forfeited as tax and surcharge, while onefourth will be parked with the government for four years to be used for social welfare scheme.
Then, in February, came Operation Clean Money, or Swachh Dhan Abhiyan, to identify those who deposited large amounts of cash between November and December, and give themachance to explain the source of their funds.
In the first batch, around 1.8 million people whose deposits do not appear to be in line with their income tax profile have been identified using analytics and sent emails to explain their funds.
The deadline for filing answers was February 10, but was extended by five days to February 15 in view of the poor response.
Not everyoneatax avoider
While the tax authorities are going about their task inamethodical way, not all the people who get such queries may be tax offenders.
As much as Rs.4.5 lakh crore was deposited by these 1.8 million people during the 50day period given to deposit old currency notes after the demonetisation announcement.
Overall, deposits between Rs.2 lakh and Rs.80 lakh were made in about 10.9 million accounts with an average deposit size of Rs.5.03 lakh.
Deposits of more than Rs.80 lakh were made in 148,000 accounts with an average deposit size of Rs.3.31crore.
The government is leaving aside those who deposited up to Rs.2.5 lakh; they are not part of the 1.8 million identified assesses and they will not be asked any questions.
“As the prime minister has clearly said that (for deposits) up to Rs.2.5 lakh, we will not ask (questions), so we have put that data aside at the moment,” says Central Board of Direct Taxes Chairman Sushil Chandra.
Those who were sent emails and SMSes by the tax authorities had to submit their responses on the government´s income tax filing portal.
In addition,ahelpline number was also provided to ensure people didn´t have to visit income tax office in person in case of any problem while submitting their responses online.
However, not all the responses received by the government will be scrutinised.
If the source of cash is found justified, the verification will be closed.
The verification will also be closed if the cash deposit is declared under PMGKY.
There are other instances too where deposits will not be investigated.
Chandra explains if someone has deposited Rs.3 lakh and has an annual taxable income of Rs.10 lakh, the tax department will not bother them.
Giving another example, he says, if an employer shows cash in hand of Rs.10 lakh for an employee in the balance sheet and has deposited Rs.5 lakh, the tax department will not scrutinise that. “But if the employer has deposited Rs.5 lakh and has not filed return of the last three years, thenIshould touch him (for scrutiny),” he says.
The goal, he insists, is not to hound people and only go after suspicious deposits.
“Only where it (the income and filing) is absolutely not matching, action will be taken,” he says.
Concerns on both sides
The outcome of the ongoing schemes will be crucial to the government´s drive against black money.
However, the response to the schemes so far has been tepid.
Only about 40 per cent, or 520,000 of the 1.8 million to whom emails were sent, have responded.
The income tax department will once again issue letters to those who didn´t respond to its queries the first time round.
At the same time, the department has also warned them of enforcement actions under the IncomeTax Act and other applicable laws.
Not everyone who replied to the queries, though, is sure how the government will react to their disclosure.Atrader who did not want to be identified says there was no column for cash in hand on the portal and he had to file it as annexure.
Similarly,abusinessman says names of each and every customer were not known to him and as such he attributed his receipts to sales to unidentified customers.
He does not know whether his response will satisfy the tax department.
The incometax department, meanwhile, is likely to launchasecond phase of the Swachh Dhan Abhiyan next month.
It may ignore standalone deposits below Rs.5 lakh and focus on deposits made before demonetisation was announced on November 8. For this, it will appoint two analytics firms to look into the statements of financial transactions that it will receive from the banks.
Clearly, the war on black money is not over and the final tally on how much of the illegal money has been unearthed by the government is still wide open.
In addition,agrace period has been offered for nonresident Indians and those who were abroad from November 9 to December 30: they have time till March 31 to deposit their old currency notes with the Reserve Bank of India.
According to provisional estimates, 94 per cent of the demonetised Rs.500 and Rs.1,000 notes, collectively worth Rs.15.44 lakh crore, have been deposited with the banks.
If these figures are indeed the final numbers, it would mean the black money drive hasn´t achieved what the government had hoped for.
Hence, income disclosure schemes have followed.
While people are being encouraged to voluntarily disclose their wealth, advance analytics is also being used to catch the offenders.
The first to come was the Pradhan Mantri Garib Kalyan Yojana (PMGKY), also known as Income Declaration Scheme II, in December to give people an opportunity to voluntarily declare their unaccounted money.
Under the scheme, open till March 31, half the money of declarants will be forfeited as tax and surcharge, while onefourth will be parked with the government for four years to be used for social welfare scheme.
Then, in February, came Operation Clean Money, or Swachh Dhan Abhiyan, to identify those who deposited large amounts of cash between November and December, and give themachance to explain the source of their funds.
In the first batch, around 1.8 million people whose deposits do not appear to be in line with their income tax profile have been identified using analytics and sent emails to explain their funds.
The deadline for filing answers was February 10, but was extended by five days to February 15 in view of the poor response.
Not everyoneatax avoider
While the tax authorities are going about their task inamethodical way, not all the people who get such queries may be tax offenders.
As much as Rs.4.5 lakh crore was deposited by these 1.8 million people during the 50day period given to deposit old currency notes after the demonetisation announcement.
Overall, deposits between Rs.2 lakh and Rs.80 lakh were made in about 10.9 million accounts with an average deposit size of Rs.5.03 lakh.
Deposits of more than Rs.80 lakh were made in 148,000 accounts with an average deposit size of Rs.3.31crore.
The government is leaving aside those who deposited up to Rs.2.5 lakh; they are not part of the 1.8 million identified assesses and they will not be asked any questions.
“As the prime minister has clearly said that (for deposits) up to Rs.2.5 lakh, we will not ask (questions), so we have put that data aside at the moment,” says Central Board of Direct Taxes Chairman Sushil Chandra.
Those who were sent emails and SMSes by the tax authorities had to submit their responses on the government´s income tax filing portal.
In addition,ahelpline number was also provided to ensure people didn´t have to visit income tax office in person in case of any problem while submitting their responses online.
However, not all the responses received by the government will be scrutinised.
If the source of cash is found justified, the verification will be closed.
The verification will also be closed if the cash deposit is declared under PMGKY.
There are other instances too where deposits will not be investigated.
Chandra explains if someone has deposited Rs.3 lakh and has an annual taxable income of Rs.10 lakh, the tax department will not bother them.
Giving another example, he says, if an employer shows cash in hand of Rs.10 lakh for an employee in the balance sheet and has deposited Rs.5 lakh, the tax department will not scrutinise that. “But if the employer has deposited Rs.5 lakh and has not filed return of the last three years, thenIshould touch him (for scrutiny),” he says.
The goal, he insists, is not to hound people and only go after suspicious deposits.
“Only where it (the income and filing) is absolutely not matching, action will be taken,” he says.
Concerns on both sides
The outcome of the ongoing schemes will be crucial to the government´s drive against black money.
However, the response to the schemes so far has been tepid.
Only about 40 per cent, or 520,000 of the 1.8 million to whom emails were sent, have responded.
The income tax department will once again issue letters to those who didn´t respond to its queries the first time round.
At the same time, the department has also warned them of enforcement actions under the IncomeTax Act and other applicable laws.
Not everyone who replied to the queries, though, is sure how the government will react to their disclosure.Atrader who did not want to be identified says there was no column for cash in hand on the portal and he had to file it as annexure.
Similarly,abusinessman says names of each and every customer were not known to him and as such he attributed his receipts to sales to unidentified customers.
He does not know whether his response will satisfy the tax department.
The incometax department, meanwhile, is likely to launchasecond phase of the Swachh Dhan Abhiyan next month.
It may ignore standalone deposits below Rs.5 lakh and focus on deposits made before demonetisation was announced on November 8. For this, it will appoint two analytics firms to look into the statements of financial transactions that it will receive from the banks.
Clearly, the war on black money is not over and the final tally on how much of the illegal money has been unearthed by the government is still wide open.
Business Standard New Delhi,23rd February 2017
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