New tax penalties, will it help to dig out black money?
- According to data of Central Board of Direct Taxes only 3.81% pay income taxes in India.
- Cash accounts for only 12% of the overall black economy of India.
- Many new IT provisions are time bound yet they lack clarity for taxpayers.
Even since demonetisation, a number of measures have been adopted, introduced, and imposed by the central government, RBI, and the Central Board of Direct Taxes to bring out every single paisa of black money stashed in cash across the country.
The Taxation Laws (Second Amendment) Bill, 2016 introduced after the currency ban paves the way for imposing heavy taxes on declarants of unaccounted income and those who are caught with undisclosed black money on IT raids. Also, this bill introduces Pradhan Mantri Garib Kalyan Yojana 2016 that further punishes the declarants of unaccounted income.
You can read all about this bill and the changes it introduces here.
Now, according to data by Central Board of Direct Taxes only 3.81% pay income taxes in India as per 2014-15 assessment year. In numbers, it is 48 million people. Among them only slightly above 1.33 million declares their income to be above 10 lakh in a year.
Statistically speaking, almost a good percentage of Indians have unaccounted for money or undeclared income that can be liable for penalised under the new IT amendment bill.
So, if the IT department is to penalise tax evasions and unaccounted income under this new amendment, then this will be a massive exercise leading to more confusion and uncertainty.
Income adjustments and filing of revised IT returns also will be penalised making it all the more difficult and confusing for taxpayers to come clean with their income tax filings.
Read about new revised IT filing here.
For traders, this new income tax amendment is all the more dangerous since they do not keep account of all monetary transactions leaving them unprotected and exposed.
A lot of the new IT provisions are yet to be clarified, and since many of the rules are time bound, it is difficult to understand and speculate on how much government or the country will gain from this newer provisions and changes.
Since cash accounts for only 12% of the overall black economy of India, according to India Ratings and Research, leaving 88% of the black money converted through various means untouched; will this passive aggressive attack on black money will have any impact on India's economy or not is still questionable.