Retirement: Register Aadhaar Numbers with Banks
All Central government pensioners should register their Aadhaar numbers with banks to avoid any problem in getting pension.
 
An order issued by the minister of personnel, public grievances and pensions said: “All the pensioners or family pensioners are, therefore, advised to get themselves and their family members registered for Aadhaar and furnish this information to the pension disbursing authority.” This exercise should be completed at an early date to avoid inconvenience at the time of submission of life certificate.

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Will the Black Money Law Work?

If the generation of black money is not curbed, the new law will be just another amnesty scheme and tool for tax terrorism

 

The Narendra Modi government swept into power on the promise that it would provide minimum government, maximum governance and help bring back the vast hoards of India’s wealth that is ostensibly stashed around the world. For almost a year, the government did very little. The prime minister has had to face barbs and offer an explanation to parliament. 
 
Soon after, the government introduced The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill in Lok Sabha. There is a strong feeling that no political party would want to appear to be against the return of black money stashed abroad. So, the law may come into force quickly. But, will it succeed in getting people to bring back unaccounted overseas money when all other efforts have failed in the past? 
 
To give the government its due, it certainly seems more serious about intent and implementation. The proposed legislation seems simple and comprehensive and has adopted a carrot-and-stick approach. It provides a limited, one-time compliance opportunity to come clean on payment of a gross tax of 30% and an equal penalty. Moreover, those who have omitted to disclose foreign accounts with ‘minor’ balances of up to Rs5 lakh will be exempted from penalty and prosecution. 
 
Failure to disclose and being discovered later will not only attract tax of 30% but also three times the tax as penalty. Wilful tax evasion on foreign income or assets will attract prosecution and is punishable with rigorous imprisonment from three to 10 years. The law covers benami ownership and also those who induce or abet another person (probably employees) to file false returns. This covers banks and financial institutions which are notorious for helping people open overseas accounts and to hide the trail through a chain of investment companies and false documents. 
 
International private bankers openly canvass such business in India and help conceal income by setting up a chain of numbered accounts and dummy companies. HSBC was caught helping Americans of Indian origin to evade US taxes by opening bank accounts in India; its Geneva branch has a number of Indian accounts which are being investigated. HSBC is certainly not the only one; it is just the one that got caught. Even the Securities & Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have hit upon on several trails of unaccounted overseas accounts but allowed them to be buried through consent orders or compounding. 
 
Many wealthy Indians, as well as their key money-managers and cohorts, have become citizens of tax haven countries such as Macedonia, Bulgaria, Montenegro and Romania by investing anywhere between 400,000 to a million Euros. They continue to be employed or do business here like Indian citizens often without disclosing that they are foreigners. The family of Subrata Roy (of the Sahara group) is among those who are Macedonian citizens with known wealth and businesses there. 
 
Will the new legislation, with its stringent provisions, induce all these people to bring back their undisclosed foreign wealth? It depends on two factors. The government’s seriousness about the Bill will be established only if the generation of new black money is stopped. A large amount of black money is generated for political funding and to route money to political parties/politicians. Unless that ends, businessmen will always be confident that any attempt to unearth their concealed stash can be stymied. 
 
The on-going purge after the 2G scam and the cancellation of coal blocks certainly indicates that big-ticket corruption of the UPA2 variety has ended. But this is mainly because of Supreme Court-directed actions, following public interest litigation based on the Comptroller & Auditor General’s reports. All of them pertain to actions and decisions of the UPA period. 
 
But there is no sign of change in the real estate sector, which is the other large block of monumental corruption, or even in the bribes and speed money that ordinary Indians are forced to pay to netas and babus for routine work or to avoid harassment. 
 
On the other hand, we have worrying examples of whistleblowers (vigilance officer of All Indian Institute of Medical Sciences) and diligent officials like Dr Ashok Khemka being transferred for doing their job right. Such actions do not instil public confidence. 
 
Then there is the ‘one-time tax compliance on payment of a penalty’ offered by the black money Bill. Former union secretary, EAS Sarma, has written to the government to say, “I will not hesitate to seek judicial intervention in this matter if the government decides to go ahead with such a dubious amnesty clause (this was before the Bill was introduced in the Lok Sabha).” On the other hand, countries like Australia and the US have successfully used such amnesties to force their citizens to disclose substantial sums of money stashed in international tax havens. 
 
It worked in those countries for two reasons. The threat of criminal prosecution and penalties for non-disclosure was serious and one-time compliance was made easy and workable. Like the Indian Bill, the US too offered only a ‘partial amnesty’, meaning that tax had to be paid with interest and penalty. The Indian law has only proposed flat tax of 30% with an equal penalty. But the key here is whether the amnesty will offer quick closure, or whether there will be a permanent threat that accounts can be opened going back decades. 
 
A leading tax lawyer says that, although the black money Bill provides for due process, issue of notices and appeals, none of it really works in practice and people are at the mercy of assessment officers and their capricious orders, justified on the grounds of meeting ‘tax targets’ set out by the finance ministry. The Income-Tax Act already allowed assessment of those with overseas income to be opened going back 16 years; the black money Bill prescribes no such limit; this means that tax officials can take their scrutiny back for decades. This could be a huge deterrent to disclosure; in fact, some lawyers say that requests for help to become non-resident Indians have resumed for, the first time, after the BJP came to power in May2014.
 
Unfortunately, there has been very little pubic discussion on the black money Bill, although tax lawyers have been quietly flagging their concerns to the government. These discussions and debates ought to happen in the public domain and all concerns should be answered and clarified explicitly. The key would be the operation of the ‘one-time compliance’ facility and whether it will lead to effective closure after a process of disclosure, hearing and declaration and payment. 
 
For companies, there are some niggling issues—like the definition of what is ‘normally resident in India’— and what constitutes ‘place of effective management’ and its interpretation. If tax officials are allowed to decide this at their discretion, it could have serious implications for foreign companies with significant Indian operations. They would not only be taxed as per Indian laws, but would unintentionally find themselves falling foul of provisions of tax deduction at source (TDS) or minimum alternative tax, etc. All these have draconian implications and penalties. 
 
I believe that the government has to do a lot more to create public confidence that it is serious about eliminating corruption and black money. Otherwise, the black money Bill will only be a tool of tax terrorism, which is selectively used to fix political rivals or dissent. 
 
Moneylife Foundation plans to start the process of a public discussion on the black money issue with a talk by Dr Subramaniam Swamy on 24th April.
 

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COMMENTS

tikku

2 years ago

In our democratic system, that is prevalent now, any law will not be effective as we see everyday.

Suketu Shah

2 years ago

Unless Modi and Co arrest the fraud CA's responsible for black money (lot of them are and infact fraud CA's are the root cause of this in league with hawala operators),things wl not change much.I am happy to see lot of CA's (fraud ones) being put behind bars recently for fraud,cheating,bribing govt officials,etc being reported in the press.Several more wl be

CA's are the root cause of the black money.Solve the disease from the root.

Andy

2 years ago

There should be clearly defined parameters and differentiation between legitimate after tax (disclosed amounts earned from transparent sources) but inadvertently not mentioned in tax returns, and real black money which is hawala and under/over-invoicing or offshore commissions. The bill should differentiate that all foreign accounts are NOT black money secret accounts and were alowed to be freely kept by FEMA 6(4) without any prior permission or declaration. Also the source of such funds should be simplified proof such as an earning record abroad of an Indian who lived abroad for many years and then returned to India leaving some of his taxed savings behind as allowed liberally under FEMA. My fear is that the legit account holders, in order to avoid tax terrorism, will go the "amnesty" route and be forced to part with 60 percent of their non-black savings than face future hassles by empowered assessing officers, while the real big operators will have moved their money out ages ago. In this way the govt will be able to boast that because of its fight vs black money xxx thousands of declarations have been made and money brought home,without disclosing that the declarers are really honest taxpayers who would rather "come clean" rather than fight tax terorism. This will affect the expat Indian who may not then want to return and work in India as part of Modi's make-in-india program. Sr. Swamy would be well advised to ask the govt to make a sharp difference between this kind of legitimate foreign account which is a deposit abroad but whose proceeds are allowed to be reinvested or freely used under FEMA, and the Big crooked Operator. Ordinary people, honest tax payers should be aggressively protected from harrassment. Let there be a penalty or fine for non disclosure in tax returns of disclosed accounts abroad but put them in a separate category or tghere will be a lot of middle class and expat political resistance to BJP developing. Also, the bill should clearly address the problems like Social Security payments (out of income earned in the US) which is NOT taxable in India under the DualTax Avoidance Treaty.Untrained AO's may be untrained for such tasks and undue harrassment will make a mockery of the whole tax regime.

manoharlalsharma

2 years ago

Will the Black Money Law Work? / Nothing serious in INDIA we r so flexible all around and MASTERED in HOW 2 MANEGE ? but is a STAGE / PLATE FORM to NEGOTIATE and DEAL STUCK 4 POLITICIANS only will be BENEFITED.

SuchindranathAiyerS

2 years ago

Unless the Govt addresses the elephants in the room holistically, congruently and consistently, Black Money will flourish as always. Corruption is an addiction. And very early in the game, the Politician-Bureaucrat nexus made the "Bribe Giver" culpable and covered up what is blatant extortion from a population smothered under irrational, social engineering and totalitarian laws on one hand and an increasingly incompetent and insouciant (unaccountable) Neta-Babu-Cop-Milard-Crony Kleptocracy with the euphemism of "corruption": India's Parliament has egregiously avoided impeaching Corrupt and Incompetent members of the Higher Judiciary on grounds of Caste and Religion, thereby further fomenting the phenomenon. It is unlikely that anything will change until: (1) Inequality under law and exceptions to the rule of law are expurgated from the Constitution and laws of India. (2) Bribe Taking is defined as criminal extortion or treason and made a capital offense with special rules of evidence and special courts with summary powers (akin to a Military Court Martial). (3) All court proceedings are video graphed and archived for public viewing and can be used as evidence to prosecute Judges and Magistrates at all levels under special laws and special courts with summary powers akin to a military Court Martial, for insouciance, negligence, tardiness, disregard for law and propriety, behaviour unbecoming of a Judge such as lack of etiquette and manners, (4) every job on the "Public" i.e. Government Pay Roll has specific and unique Key Responsibility Areas, Key Performance Parameters and Objectives for which they are held accountable on pain of summary dismissal for non-performance or life imprisonment for treason for sabotage under special laws and special courts with summary powers akin to a military Court Martial and (5) India creates an Ombudsman Service of reemployed and retrained military officers (Colonel and Below, JCOs and NCOs) who retire before 50 to serve as presiding officers, investigating/prosecuting and enforcement officers at the afore mentioned "Special Courts", one for every taluk with powers to arrest, incarcerate, try and punish any and all from the President of India to a peon in accordance with the Special Laws framed therefor.

tikku

2 years ago

Years have passed since action against black money is being discussed, in Parliament and many other meetings without any tangible result. Govts have been wary of acting against black money holders due involvement of its own members. Even now it displays fear of the opposition and worry for future vote bank. If it does firmly and decisively act with strong hands without caring for vote bank, the law will work. It might surprise all to see that firm action against black money holders will add many times more to Modi’s vote bank instead.

B. Yerram Raju

2 years ago

The Black Money bill does not exude confidence over its prospect of curbing the evil as no accountability and timelines have been prescribed for disclosures and punishments. Justice in this country carries the notoriety of abominable delays.

If laws are meant for implementation, the contours of interpretation by different layers need prescription statutorily, so that one would fear approaching the higher Court for remedy if he had failed in the lower Court. The remedy should not be worse than the disease.

Earlier I mentioned in one of the responses that the dealers in waste and scrap, on par with those dealing in real estate, are bavens of black money and this can be curbed by a vigilant tax official. All the major cities and metropolis are generators of huge black money from such waste and scrap.

Ravi

2 years ago

Only solution to Black Money Problem.

This will cure the Black Money Cancer

https://http://www.youtube.com/watch?v=t7ZWTcBggRE&feat...

Senior Citizen

2 years ago

Very educative article.
Despite tough regulations in US (FATCA, FBAR etc.) US Citizens still account for the largest share of world's black money. India will find it extremely difficult due to lack of political will, poor implementation etc. It will soon be forgotten.

REPLY

MG Warrier

In Reply to Senior Citizen 2 years ago

What will be forgotten? We take much longer time than US to forget things. Do not give such hopes to those who have accumulated black money. BLACK MONEY IS MALIGNANT!CAN DO MORE HARM THAN THOSEWHO HAVE IT IMAGINE...

Senior Citizen

In Reply to MG Warrier 2 years ago

Please don't get emotional. We had FERA which was very severe. How many cases were brought before for prosecution under FERA? This bill will also have similar fate. Everybody knows black money is bad but no one stops it anywhere in the world. That is reality.

Sucheta Dalal

In Reply to Senior Citizen 2 years ago

You call your self a senior citizen, so you cannot be young. You are probably only ignorant. Under FERA, the Enforcement Directorate indulged in untold harassment and even torture of citizens. It required a sustained campaign and decades before it was defanged.
People were too scared to provide information and go public with the truth.
ED officials had no problem falsifying and fudging documents and leaking it to us, naive media persons, when were were young reporters.
It is only with time we realised what was going on in the name of FERA. Needless to say , ED was a coveted posting that used to be auctioned and officers amassed wealth.
No organisation was sacred and anyone's reputation could be tarnised at will . Grow up and dont ask for this kind of political tool, when the biggest source of black money in India is political funding!!!

MG Warrier

2 years ago

With the exception of Moneylife and perhaps some regional newspapers here and there, media participation in creating awareness about black money or the methods to unearth a part of the black money or 'black assets' hoarded inside and outside the country is not significant. Political parties use the issue for their limited purpose of winning elections. Government policy including taxation policy has a role in further growth of the black money monster. Banking System should also cooperate in handling this issue.

Tax Travails of Seniors
This is with regard to the Union Budget 2015 and its implications for senior citizens with respect to their income-tax obligations. We are not having it easy, be it for random scrutiny or wrongful demands for more taxes. The Budget is supposed to have extended many tax concessions to senior citizens to help them breathe easy. Yet, taxes continue to give us (pensioners) sleepless nights.
 
No level field: Some of the inequalities in the Budget announcements include the fact that we cannot take advantage of the enhanced Section 80C deduction for NPS to save on taxes.
 
There is no level playing field between the two categories of senior citizens. In the case of senior citizens in the 60-80-year slot, the only enhanced benefit is medical insurance premium of Rs10,000, whereas those above 80 years are allowed deduction of medical expenditure up to Rs30,000. Presently, the exemption limit for above 60 and 80 years is Rs3 lakh and Rs5 lakh, respectively. A higher slab for the latter was probably based on the assumption that they would spend more on medical expenses which is now sought to be met with the deduction of Rs30,000. 
 
There is an urgent need to raise the exemption limit for those in the 60-80 years’ age group more generously. 
 
In the past five-six years, the basic exemption limit for the 60-80 years’ age group rose by a mere Rs50,000, while for those above 80, it has doubled from Rs2.5 lakh.
 
This apart, the real trouble for seniors arises from issues related to filing of returns. Among the most frequently heard complaints is the demand for more taxes due to TDS mismatches.
 
Magnifying glass: Another painful issue faced by senior citizens seems to be scrutiny assessments. Under this, the computer systems randomly pick up returns for further scrutiny, to make sure the assessee has not concealed anything. These assessments are predominantly based on information provided in the AIR (annual information return) which requires disclosure of certain high-value transactions and investments.
 
But, very often, these kind of assessments happen after three-four years; the officials don’t link new investments made with foreclosure, redemption or switches from older ones and they seek all kinds of documents, such as bank statements, balance sheet, net worth calculation, etc. How can everyone be expected to keep so much paper?
 
Possible way forward: With most cases causing unnecessary stress to seniors, I-T department should have a cell dedicated exclusively to seniors which will help expedite closure of deserving cases. 
 
The department can also obtain any documents needed directly from banks and other institutions instead of making us run from pillar to post. Should we, at all, be called to appear in person unless it is absolutely necessary?
Subrahmanian SH, by email
 

Woes of Low Cibil Scores

This is with regard to “Credit Information: Changing Scenario” by Sucheta Dalal. It is a good ad to make the people aware of CIBIL. But what about those who have already taken a loan and done the settlement? What if the CIBIL score is too low in such cases? Because of the low score, there won’t be any transaction happening with the bank other than a normal saving/ salary account. How can such people improve their CIBIL scores in an easy manner? 
 
As mentioned, “the credit bureau is obliged to mail each consumer a free credit report every year.” Why can’t we have this facility at least for those who have low scores, so that they could get over it?
Vishwanath, online comment
 

Impatient Voters?

This is with regard to “Delhi elections bring to the fore governance issues again” by Sucheta Dalal. AAP’s (Aam Admi Party) victory in Delhi against two stalwarts, i.e., BJP (Bharatiya Janata Party) and Congress Party, has clearly pointed out that our people (particularly, the illiterate oldies and edu-cated youngsters) have become terribly impatient and want results in 100 days. They waited for BJP to do that and now they might wait for AAP to do the same! 
 
Strangely enough, the uneducated oldies amongst the voters waited 60 long years to dislodge Congress Party out of Indian politics. But the same voters do not want to give NDA (National Dem-ocratic Alliance) even a year or two. If this ‘100 days’ incumbency and ‘throwing out game’ contin-ues, the very fabric of democracy will be disturbed. It will give way to either a revolution or a civil war-like situation in India. Was this what was expected at the end of rooting out the Congress Par-ty after 60 years of Gandhi-Nehru rule?
Prakash D Basrur, online comment
 

When is a share a better buy?

I have been a regular reader of Moneylife. I am not from finance background. Request your clarifi-cation: 
 
In 2 April 2015 issue of Moneylife, on pages 44 and 45, the author has given a list of stocks for value investing. The author has given the ratio EV/EBIT. As a layman, I am not able to make out whether the stock is a better buy if the ratio is lower, or the other way around. For example: 
 
Moil @ the ratio of 4.4 is a better bet than Mangalore Refinery @ - 3.17?
 
Coal India, considered one of the best, is @ ratio of—709. What does that mean?
 
The note on how to use the data does not clarify these aspects. Request you to add an explanation in future. It will be really helpful.
Girish Vyas, by email
 
Enterprise value in EV/EBIT is market-capitalisation plus debt. EBIT is earnings before interest and taxes. The higher the figure, the higher is the valuation of the company. In general, we should aim for companies with lower figures, like low PE (price to earnings ratio), but not those with negative figures. However, while those with higher ratios are expensive, they can continue to remain ex-pensive and go even higher. This ratio cannot be used independent of other ratios such as return on equity and governance issues. — Editor
 

Managing ill-health

This is with respect to ‘I have Parkinson’s but Parkinson’s will not have me’ in the Beyond Money section. Articles like these help readers familiarise themselves with the latest developments in certain areas of medical science. As those who really suffer such ailments have no access to websites or newspapers, the responsibility for sharing information is more on those who are healthy.

 

N Madhavan, Dr BM Hegde and Moneylife deserve special appreciation for their contribution in creating awareness about living a healthy life and ‘managing ill-health’. Perhaps, Moneylife could adapt an old slogan of a steel producer and say, “Moneylife also talks about money!”

MG Warrier

 

Senior citizens’ income tax woes

This is with regard to “Tax-proof Investment in the Name of Spouse & Children”. It is true that a taxpayer gets TDS (tax deducted at source) credit as per tax credits available in Form 26AS. But I have been receiving tax credit mismatch intimation for the past three years, despite the fact that TDS claimed matches 100% with Form 26AS tax credits and the tax credit mismatch tab in your account on the income tax department’s websites also says so. What is the reason for this? If there is difference, it should appear in Form 26AS.

 

Secondly, there is no chance for the taxpayer to explain his viewpoint, other than the limited options given under rectification. Thirdly, taxpayers, who are old, hard of hearing and not so proficient in Internet use, have to hire professional service-providers to do the job. Besides cost, running around is a problem for the older generation. There is need to allow various modes to respond to I-T notices/ intimations.

 

Will someone take note of an 80-year-old dog?

Joginder Sud

 

Pay your advisor

This is with regard to “Conflicted Advice” by Jason Monteiro. A simple solution to get rid of the conflict and get genuine advice: ‘Pay your advisor’ directly, rather than through commissions.

What are the advantages you get? (a) Get genuine advice that helps you achieve your goals and protect your money; (b) no worries about the ulterior motives of your advisor; (c) save costs through lower expense products where appropriate; (d) save costs by opting for direct plans; and (e) get assistance in negotiating lower expenses, wherever possible.

 

But there is no free lunch in this world. So, be ready to pay your advisor.

Anand Doctor

 

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