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Budget 2016: Black Money Amnesty 2.0: Will they, Won't they?

The Budget 2016 continues its stance against Black Money, and is replete with new schemes, or updated older schemes to bring into the system, funds that have been siphoned away without being taxed. In this vein, there are some interesting comments in the Budget.

Income Declaration Scheme, 2016

Under this scheme, any funds that are declared from June 01, 2016 will be levied a base tax of 30%, along with additional surcharge of 7.5% (the proceeds of which go towards the Krishi Kalyan scheme), and another 7.5% as penalty. There are certain circumstances under which this ‘Amnesty’ will not be considered:

  • Where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C;
  • Where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of the Act has not expired;
  • Where information is received under an agreement with foreign countries regarding such income;
  • Cases covered under the Black Money Act, 2015;
  • Persons notified under Special Court Act, 1992;
  • Cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988.

Under this Section, it also says that the income now declared “white” is exempt from wealth-tax! 

Now the tax scheme makes a clear distinction between under-reported income and misreported income.

It is proposed that the rate of penalty shall be fifty per cent of the tax payable on under-reported income. However in a case where under reporting of income results from misreporting of income by the assessee, the person shall be liable for penalty at the rate of two hundred per cent of the tax payable on such misreported income.

Under Section 270AA, a new entrant this year, people can apply for immunity from the imposition of penalty for with-holding assets as income. Again, this is contingent on certain conditions, as well as the whims of the Assessing Officer. 

It is also proposed that no scrutiny and enquiry under the Income-tax Act and Wealth-tax Act be undertaken in respect of such declarations and immunity from prosecution under such Acts be provided. Immunity from the Benami Transactions (Prohibition) Act, 1988 is also proposed for such declarations subject to certain conditions.

While the fight still goes on, the fact is that people who possess black money will think twice before turning themselves and their money in. What is to stop an Officer, from hounding a citizen who has declared? What is the guarantee that he won’t be harassed year-on-year under the same Act? The officer will be loathe to believe that every single rupee has been accounted for, which gives him sufficient justification to revisit the case. Or maybe a new Officer comes into the picture and opens up older cases. The intentions are noble, but the practical efficacy of such a stance is still to be ascertained.


  • piyush says:

    I dont get the point of such schemes. All this tax chori is done by small-mid businesses and professionals like doctors, lawyers etc. The big companies generally refrain and salary ppl have no choice.
    Point is, if these small-mid size businesses were okay to pay tax @ 45%, wouldn’t they had declared their true income in the first place where the tax rate was 30% only. The whole point was to not pay taxes @30%. Expecting those same guys to now pay @45% is a brilliant idea !
    The first VDIS worked cause ppl found loopholes to effectively turn black to white at low effective tax rates of 5-10%.
    If these guys were okay to convert black to white by paying taxes, they wouldn’t need to go through a scheme which charges them 45%, they would simply find ways to show it as income as per normal business operations and pay tax on that at 30% and be done with it rather than at 45%.

    • Getafix says:

      As a small businessman who has no option but to manage taxes a little bit, I agree a 100%.
      Why would anyone want to pay 45% and not 30% to start with. Especially these days when “managed” money yields next to nothing while taxed income has many investment and yield options.
      Moreover, the amnesty is in the name only. Your local tax sleuth goes after you as soon as he realizes you could be a potential goose that lays the golden eggs.
      Unless, such schemes somehow benefit the ruling politicians and their cronies.

    • Ajay says:

      Spot on, Piyush. Brilliant idea indeed!!!

  • manu says:

    If Goverment really serious about black money then they should seriously consider getting rid of personal income tax completely. Then these mid size business man in 2 years easily fill there books with 2-5 crore sales.
    They will deposit there money in banks without fear.
    Banks will get lot of money and lot of these new customer to give loan and credit market will grow like anything.
    Mid size business man will easily get the loan from bank becuase of good books at market rate and he will stop taking money from local lenders @14-24 %.
    With so much money transaction economy will easily cross 10%.
    Our share market will be flooded with FII’s.
    Every one will be happy and govt will easily win next election.