Voluntary Disclosure of Black Money Comparing

1997 & 2015

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BY RAKESH DUBBUDU ON OCTOBER 7, 2015

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The declarations under the Black Money act surprised many including
the Government. At the end of the 90 day compliance period, only 638
declarations were made totaling an amount of 4147 crore rupees. This
would result in 2488 crore rupees of tax revenue to the government.
This amount was compared to a similar scheme (Voluntary Disclosure
of Income Scheme) in 1997 where a much larger amount was declared.
There was considerable disappointment when the Government announced the
Declarations received and amount declared under the compliance window under
The Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015. According to the government, a total of 638 declarations have
been received under the compliance window declaring undisclosed foreign
assets amounting to Rs 3770 crore. This amount was later revised to Rs 4147
crore, while the number of declarations remained the same. The compliance
window opened on 1st July, 2015 and was open till 30th of September 2015. For
the declarations made, Tax at the rate of 30 percent and penalty at the rate of
30 percent is to be paid by 31st December 2015.
The Voluntary Disclosure of Income Scheme (VDIS) 1997
Many tax experts compared the current initiative with the Voluntary Disclosure
of Income Scheme of 1997, an idea of then finance minister, P Chidambaram. In
his Budget speech of 1997-98, the then Finance Minister in the United Front
Government, P Chidambaram remarked that in a country of 90 crore people, it
was absurd that only 1.2 crore people are assessed to income tax and that only
12000 of the assesses are in the tax bracket of income of above Rs 10 lakhs.
In this budget speech, he said that it was time to think of a scheme to harness
`black money for productive purposes. He also believed that the time
opportune to introduce a Voluntary Disclosure Scheme. The scheme was
supposed to be very simple that irrespective of the year or the nature or the
source of the funds, the amount disclosed, either as cash, securities or assets,
whether held in India or abroad, would be charged at the revised highest rate of
tax. Apart from these, Interest and penalty will be waived. Immunity shall also
be granted from any action under the Income-tax, Wealth tax and the Foreign
Exchange Regulation Acts.
Another feature of this scheme was that 77.5% of the funds collected through
the scheme will be accrued to the State governments. This was seen as a step
to seek active co-operation of the state governments.

The scheme was introduced in 1997 and the compliance period was 6 months.
The tax payable on the declared amount was at the rate of 35% in the case of
companies and firms and 30% in the case of others.
By the end of the scheme period, a total of 33,339 crore rupees was declared by
4,75,133 declarants. This resulted in a collection of 9584 crore rupees in taxes
by the government. The highest amount was collected in Mumbai (2032 crore),
followed by Delhi (1228 crore) & Ahmedabad (968 crore). As promised, 7594
crore rupees were transferred to the states.
Comparison

Why not another VDIS?

There are multiple reasons given by tax experts for the failure of the current
scheme, the major one being the higher tax rate. The 1997 scheme was
successful because of a lower tax rate of 30%, which was not very different from
the normal tax rate. Even the rigorous imprisonment clause of three to ten years
for willful attempt to evade tax did not help.

Another issue that went against the current NDA government is the affidavit
filed by the previous Governments that there wont be another amnesty scheme
like the VDIS. The previous governments had to file this affidavit in response to a
PIL filed by a private citizen in the Supreme Court that such schemes discourage
honest tax payers and are unfair to them.

New Delhi: As much as Rs 65,250 crore of blackmoney was declared during the fourmonth compliance window the Income Declaration Scheme that ended on 30
September, Finance Minister Arun Jaitley said on Saturday.
Jaitley said 64,275 declarations were made in the four-month window and this figure
could go up once all the declarations filed online and manually are compiled.
The money declared totals Rs 65,250 crore, of which 45 per cent would accrue to the
government as tax and penalty.

Finance Minister Arun Jaitley. PTI

The government had provided illegal income and asset holders a one-time opportunity
to come clean by declaring their blackmoney under the four-month window and pay 45
per cent tax and penalty.
Reiterating that the one-time window was not an amnesty scheme like the 1997 one,
Jaitley said the tax collected in the 1997 Voluntary Disclosure of Income Scheme (VDIS)
was Rs 9,760 crore with an average declaration of Rs 7 lakh.
The tax collected from the Income Declaration Scheme (IDS) 2016 will go into the
Consolidated Fund of India and will be

IDS 2016: Modi govt officially

announces amount collected
from tax defaulters
The four-month Income Declaration Scheme (IDS) 2016 closed on September 30.

S V Krishnamachari

October 1, 2016 19:33 IST

An employee counts Indian rupee notes at a cash counter inside a bank in Agartala, capital of
India's northeastern state of Tripura December 31, 2010 (representational image).Reuters file

Laying speculation to rest on the amount collected under the Income Declaration
Scheme (IDS) 2016, the Narendra Modi government officially announced the number of
declarations and the amount of undisclosed income by them under the four-month
amnesty scheme that ended on September 30.
"Income Declaration Scheme 2016 unearths Rs 65,250 crore of hitherto Undeclared
Income and Assets; 64,275 declarations filed under IDS-2016 up to the midnight of 30th
September, 2016," the finance ministry said on its official Facebook page on Saturday
evening.
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Based on the 45 per cent tax applicable on the income disclosed according to the
scheme, the government will get Rs 29,362.5 crore.
The figures are provisional and are likely to go up since the declarations made in
physical form are being collated, the ministry said.
In the lengthy Facebook post, the ministry talked about the efforts made by the
government and the tax authorities to encourage people to avail of the opportunity to
come clean with their undisclosed income.
"An appeal was made by the Honourable Prime Minister of India to the general public
to come clean on taxes due. The FM personally addressed stakeholders at many
stations. More than 5500 public meetings in various cities were conducted by the
department. Innovative publicity methods like Talkathons, Walkathons, Nukkad Nataks,
were used to spread awareness about the Scheme. The Department's strategic use of
taxpayer information and data mining techniques further spurred the declarations. These
steps resulted in a tremendous response from the general public, especially in the last
two months.
"As a consequence, 64275 declarations were filed up to the midnight of 30th
September, 2016 with an aggregate of Rs.65250 Crore worth of hitherto undeclared
incomes in the form of cash and other assets being declared. With the final stock taking
of declarations being filed in physical printed forms all over the country till late night on
the last day, this number is likely to be further revised upwards," the post read.