Govt moves to allow permanent window to tax ill-gotten cash:Srcs

The rumours of conversion going on through the Jan Dhan accounts, other accounts where people were submitting money just below the exemption limit, the I-T Department wants to put a tax on these accounts as well.

The Cabinet yesterday approved amendments to tax laws to tax post-November 8 deposits. The government will move amendment in parliament.Dinesh Kanabar of Dhruva Advisors said that this move is a smart one, as it encourages people with unexplained money to give 60 percent of it back to the government, putting 25 percent into bonds.Below is the verbatim transcript of Dinesh Kanabar’s interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Nigel: You have heard the details. What is your initial take of it, how will they determine what is unaccounted money and the likes?A: Two things. First of all there is no such thing like the question which was being asked as to what is the quantum of threshold. This is not about threshold. The situation was earlier that the government made its intention clear that if you have got any deposit, which you cannot explain you would be liable to 200 percent penalty, that is under section 278. As it happens the wording of that particular section was not conducive to the levy of a penalty and could have frustrated the efforts of the government because the section would apply only when the returned income was enhanced in terms of the assessment, which he could not if you had voluntarily made any declaration declaring an income to be covered by section 68.What I now understand from the report that I see is that the government wants to come out and say that if you make any declaration under section 68 on account of unexplained cash with you and you deposit that money instead of being charged a normal tax of 30 percent, you would be charged a tax of 45 percent, in addition you will be paying a penalty of 15 percent, so 60 percent gone and another 25 percent in zero rated bonds to be redeemed after whatever point of time, which means that 85 percent of the money is required to be going out -- 60 percent into the coffers of the government, 25 percent as a long term bond. Therefore the question of levying any further penalty does not arise. Therefore probably what the government is trying to do here is a very smart thing.One hears in the marketplace about several schemes going around where people are prepared to forego 30-40 percent of their old notes in lieu of new notes that they would get. Instead of all of those things happening, the government is saying come clean, put the deposits into our bank account, whatever money remains with you -- 15 percent you can use, the 25 percent which goes in bond obviously again can be discounted and sold in the market. So you are converting your money clean without having any fear. That is a very smart move, which the government is taking up. The only thing which I am unable to appreciate at this point of time as to whether 85 percent threshold is too large a threshold or whether the government could have kept the threshold to be a little bit lower.Reema: In the voluntary disclosure scheme which was there a couple of months ago the government managed to garner close to about Rs 30,000 crore. At that time the penalty tax was about 45 percent. Under this new route, do we have any early assessment of how much the government will stand to make?A: I don't know whether one can gauge at this point of time what sort of monies would come in. But just look at what one has been reading in the media, what one has been discussing at various forums, we are talking about Rs 14 lakh crore in Rs 500 and Rs 1,000 denomination notes. But estimates are that somewhere around anywhere between Rs 4 lakh and Rs 4.5 lakh crore are unlikely to find their way back into the banks because those are unaccounted money.Now let us take for a moment even a lower threshold of Rs 3 lakh crore. What the government is saying is put those Rs 3 lakh crore into the bank accounts, we will not ask you any questions where you got the money from, we will not penalise you or prosecute you, give us 60 percent. You did not come to us earlier when we offered you a 45 percent window, now go under the 60 percent window because you did not avail of the thing earlier. Pay a 15 percent extra penalty.It is clear that if people have money rather than throw it away they would as well put it into the government and keep whatever they can and let us assume that this Rs 3-4 lakh crore whatever that number be goes back into the system. The government will get anywhere north of Rs 1,50,000 crore by way of taxes. That could be a serious boost, both to the economy to the reduction in the current account deficit. So, it would be a very smart move.Reema: Everyone is very scared if any kind of harassment from the IT department. How should we read this unexplained income for people like you and me?A: It is because people are worried about the harassment that the government is amending the provision. So, just to explain to you we have section 68, which basically speaks about unexplained monies which an assessee may have which an assessee can declare. The question was if such a declaration was made, would one or would one not be liable to a 200 percent penalty under section 278. It was the view of the experts that the section as it was worded did not allow the government to levy the penalty. That was the view of the government as was manifest in the tweets made by the revenue secretary that they did not want a 30 percent payment of taxes and this to become a warranted disclosure scheme.So, what the government has come up is a middle of the line approach to say you did not avail of the 45 percent window, avail of this new window and therefore the question of harassment would not arise because having regards to the provisions of section 68 with the amended section 115BBE you simply have to pay that tax and then the question of explaining where you got the money from does not arise. With one very important caveat that for example you cannot be any consequences under the income tax act. But if for example a government servant was to put that money then he could well have a problem with regard to whether he should be covered by the prevention of corruption act or anything else. But otherwise I would not see any ability for anybody being harassed under the income tax assuming that the section was worded as we discuss in this point of time.For more, watch accompanying videos...