Combating Corruption and Battling Black Money

By | December 3, 2017
Corruption 2 - Legal Bites

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“Corruption and black money have destroyed the Indian democracy, eating into it like a termite. But due to your blessings, the fight against corruption and black money will continue.”   Narendra Modi, Prime Minister of India.


INTRODUCTION

Corruption has become an increasingly salient issue in India today, spawning both enormous interests from the media as well as the researchers. Corruption is by its very nature difficult to objectively measure. The causes of corruption in India include excessive regulations, complicated tax and licensing systems, numerous government departments with opaque bureaucracy and discretionary powers, the monopoly of government-controlled institutions on certain goods and services delivery, and the lack of transparent laws and processes.

Corruption is not a new term in India. If we look back to Kautilya’s Arthashastra in 4 B.C. to the contemporary period, we will find thousands of examples of corruption and black money. In 2011, India saw a groundswell of popular protest in which thousands of citizens joined in anti-corruption demonstrations after a series of scandals implicated ruling politicians and their cronies in billions of dollars of graft – from the Commonwealth Games to 2G scandals, and from “Coalgate” to Adarsh Housing Society.

According to a study conducted by Centre for the Study of Developing Societies, it was a key contributor to the BJP’s winning an outright majority in parliament, the first time any party has done so in three decades.

So, soon after coming to power in May 2014, NDA government led by PM Narendra Modi had laid its foundation against black money. Here are some big steps that were taken by him in order to fight with corruption and black money.

The Supreme Court Monitored Special Investigation Team on Black Money

In its very first Cabinet meeting, the first such initiative came when the Modi Government, constituted an SC monitored SIT on Black Money.

Jan Dhan Yojana

Prime Minister Narendra Modi on 28 August 2014 launched highly motivated Pradhan Mantri Jan Dhan Yojana (PMJDY) which was a significant project of the NDA government to open at least one bank account to every family.He made it a mission to ensure that the scheme was successful. The scheme will be of immense help. The opening of accounts in the remote areas will help the rural villagers. Had the bank accounts not been opened, the people would have faced immense problems. But not now, at least for those who have bank accounts.

Till date, around 26 crore accounts have been opened so far and Rs46,000 crore has been deposited in these accounts. A total of 20.5 crore accounts have been opened in the public-sector banks, 11.45 crore accounts in the rural areas while 8.90 crore accounts in the urban areas. The PMJDY is a success story. It is a rare case of a popular policy that delivers political and long-term economic benefits. The government applied itself to the task.

While the programme has made significant headway towards genuine financial inclusion, it is clear that improving policy communication, widening and deepening progress in low-income states, and ironing out the kinks in the bank-agent model will be crucial if these hard-fought gains are to prove sustainable.

The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for Foreign Black Money

The scheme was launched to bring back black money stashed in foreign countries and tax havens. The scheme ended on 30 September 2015. The Act also had various stringent provisions for penalty and prosecution of foreign black money holders unearthed during the future investigation by the tax department.

Benami Transaction (Prohibition) Amendment Bill

In August, The Parliament passed the Benami Transactions (Prohibition) Amendment Act, 2016 (BTP Amendment Act). It came into force from 1 November 2016. The new law seeks to give more teeth to the authorities to curb Benami transactions. The notification issued by the Income Tax department stated that after coming into effect, the BTP Amendment Act, the existing Benami Transactions (Prohibition) Act, 1988, shall be renamed as Prohibition of Benami Property Transactions Act, 1988 (PBPT Act).

This is also true for some technological interventions, although those interventions like direct benefit transfer that bypass middlemen and corrupt officials have a much greater scope for success, as do interventions that transfer bargaining power to citizens and beneficiaries. We find much to commend in the sensible and wide-ranging legislative agenda to combat corruption, including the Right to Service and Public Procurement bills.

Income Disclosure Scheme, 2016

The Income Declaration Scheme (IDS) which opened on June 1, 2016, gave a chance to black money holders to come clean by declaring the assets by September 30, 2016, and paying tax and penalty of 45 percent on it. The Narendra Modi Government wanted to capture the entire parallel economy flowing in the system of Rs 7 lakh crore in India. The government was upset with the output of IDS scheme.

Though the Income Tax department had identified 90 lakh high-value transactions without PAN, the final disclosure of black money was to the tune of Rs 65,250 crore.

Renegotiation of Tax Treaties and Automatic Information Exchange Agreements with Tax Havens

The government renegotiated the Double Tax Avoidance Agreement (DTAA) with Mauritius to impose Capital Gains Tax if such Capital Asset is situated in India. The Narendra Modi Government also negotiated an Automatic Information Exchange Agreement with Switzerland. Agreements are also being negotiated with other tax havens. From 2017, Organisation of Economic Cooperation and Development (OECD) countries have agreed to share information on foreign account holders with their home countries.

Penalty on Real Estate Transactions undertaken in Cash exceeding Rs 20,000

The Narendra Modi Government imposed a penalty of 20 percent on all cash transactions exceeding Rs 20,000 to purchase or sell a property especially real estate. This was aimed at curbing the role of black money in real estate transactions.

Tax Collection at Source on Cash Sales exceeding Rs 2 Lakh

Another important step to check high-value cash transactions and create an audit trail was to impose Tax Collection at Source at a nominal rate of 1 percent on cash purchases exceeding Rs 2 lakh.

Linking the PAN Card with AADHAR Card and others

Linking of the Aadhaar number with the PAN card is part of the government drive against black money. Linking the both removes the chances of the same individual having more than one PAN card, which was a major source of tax evasion and multiple cards were proving to be a major hurdle in improving tax compliance. Besides tax evasion, multiple PAN cards were also being used to defraud banks.

Having a link with Aadhaar will enable the Income Tax Department to establish an efficient and meticulous surveillance system of detecting tax evasion. This is because Aadhaar number can enable easy access to the IT returns filed sequentially as well as other details for an individual. This is a very important step towards achieving higher economic growth and giving stability to our country.

(This was stated by Ministry of Finance in written reply to a question in the Lok Sabha)

CONCLUSION

Beside this there are several other steps taken by the government in order to curb the black money including the Prevention of Corruption Act, an independent Central Vigilance Commission, the Comptroller and Auditor General, the Judges (Inquiry) Act, the Lok Pal and Lok Ayukta Act 2013, Whistle Blowers Protection Act 2011, Prevention of Money /Laundering Act, Benami Transactions (Prohibition) Act which cover a number of areas of criminalization and bribery.

All civil servants are mandatorily required to declare their assets on an annual basis. The Elected Representatives are required to declare their assets every election cycle. And it can be seen from their recent action and steps like Demonetization that the government has good intention in order to drive away the corruption from Indian economy. The only thing there needs to be done is being stricter toward the black money holders.


– Subham Saurabh

Content Writer @ Legal Bites


Related Links

1) The Menace of Corruption

2) Top Controversial Cases of Money Laundering In India

3) GNLU & University of Melbourne Sports Law Academy On Corruption in International Sports [Jan 13-17]: Register by Jan 5