We can take this Independence Day not only to celebrate the 70th year of India’s “azaadi” (freedom) from the British, but also the potential “azaadi” from Black Money and Tax Evasion. The problem black money and tax evasion has always been a great hurdle in the way of India’s economic development. They increase the revenue deficit of the government, which later leads to inflation, and increase in tax imposition as a result. Not to mention both are a reflection of dishonesty and creates a disparity, making the rich richer and the poor poorer. Black money and tax evasion are incidental to each other – Tax Evasion results in Black Money and Black Money gives rise to more tax imposition which in turn results in more tax evasion. It is a vicious circle.
The Parliament of India guided by the progressive visions of Prime Minister Narendra Modi, has taken 2015-16 to pass two most crucial Bills which would help remove black money from the economy and curb tax evasion.
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
This Act, popularly known as the Black Money Act, was passed by the Parliament of India in 2015. It was introduced in the Lok Sabha on March 20, 2015 by Finance Minister, Arun Jaitley. It received the President’s assent on 26th May, 2015 and came into force from 1st July, 2015. It seeks to replace the Income Tax Act, 1961 for the taxation of foreign income.
This Act aims at removal and unearthing of black money from the Indian economy. Black Money means and includes undisclosed foreign income and assets located in India. The nucleus of this legislation lies in the imposition of tax on such undisclosed foreign income and assets. It provides immunity from prosecution to persons with such undisclosed foreign income and assets by giving them the opportunity to clear their tax dues in one go (tax at 30%, surcharge at 7.5% and penalty at 7.5%). The flat rate tax of 30% is to be paid on the undisclosed foreign income and assets of the previous assessment year as applicable from 1st April, 2016. The Act further provides for punishment of offences under the Act and there are certain offences where the offender will be prosecuted.
The Constitution (122nd Amendment) (GST) Bill, 2014
This Act, popularly known as the GST Bill, has been passed by the Parliament of India in 2016. First introduced on 19th December, 2014, by Finance Minister, Arun Jaitley, this Bill after much recommendations and amendments was finally passed by the Lok Sabha on 8th August 2016. Passed in accordance with Article 368 of the Constitution, Assam, on 12th August 2016 became the first state to ratify the Bill.
This Bill proposes a national value added tax through tax-credit mechanism at each stage of purchase and sale in the supply chain and is to be effected from 1st April, 2017. It aims to reform the tax structure by eliminating the cascading effect of taxes on production and distribution and the burden of multiple taxes on the common man which induces tax evasion. It also aims at eliminating corruption, complications and multi-layered tax policies by bringing it all comprehensively under a single umbrella. India will have a Dual GST structure tackling Centre, State and Inter-State transactions.
These legislations have very eloquently paved the way for freeing the Indian economy from the problem of black money and tax evasion. While the Black Money Act has just been brought into effect, the GST Bill is yet to be brought into effect. They are designed to bring forth such reformations in our economic structure in a swift, hassle-free and with a transparent procedure. This path to “azaadi” is independent of any speed breakers and pot-holes, and effective implementation of these legislations will elevate India’s world economic status making her a desirable international commercial hub.