[Economy] Bills and Acts Pertaining to Black Money

Introduction :

Central government has introduced bills and made amendments to existing acts pertaining to black money initiative, So here we discuss some of the important bills include

Indian Black Money: 

In India, black money refers to funds earned on the black market, on which income and other taxes have not been paid. The total amount of black money deposited in foreign banks by Indians is unknown. Some reports claim a total of US$1.06 trillion is held illegally in Switzerland Other reports, including those reported by the Swiss Bankers Association and the Government of Switzerland, claim these reports are false and fabricated, and the total amount held in all Swiss bank accounts by citizens of India is about US$2 billion.

In February 2012, the director of India's Central Bureau of Investigation said that Indians have US$500 billion of illegal funds in foreign tax havens, more than any other country. In March 2012, the government of India clarified in its parliament that the CBI director's statement on $500 billion of illegal money was an estimate based on a statement made to India's Supreme Court in July 2011.

In a televised address on 8 November 2016 by Indian Prime Minister Narendra Modi announced that banknotes of ₹500 and ₹1000 would cease to be legal tender from midnight. Automatic teller machines at some places were closed on 9 and 10 November. Government organisations have brought out new notes. The Govt of India had accepted the proposal of RBI in bringing out ₹2000 banknotes and a new version of the ₹500. The old notes are being removed from circulation.

Undisclosed Foreign Income and Assets (Imposition of Tax) Bill :

• Finance Minister Mr. Arun Jaitley introduced the bill in Lok Sabha on March 20, 2015 

• Passed by both Lok Sabha and Rajya Sabha Income Tax (IT) Act, 1961 replaced to tax foreign incomeApplies to all Indian residents 

• Tax evasion and hiding foreign income to be treated as Criminal cases 

• Punishment will be 3 to 10 years imprisonment with a fine amount for willful tax evasion 

• Fine imposed will be three times the tax on undisclosed amount with a 30 percent addition 

• Failure to pay tax returns on foreign assets leads to imprisonment from 6 months to 7 years with a fine 

• Fine will be 10 lac for not paying tax on foreign income 

• No fine for assets or income worth 5 lacs or less 

Prevention of Money Laundering Act, 2002

This act was enacted to curb the global menace of money laundering across the globe. 

Some of the salient features of the act include :

• Act introduced in Lok Sabha by then Finance Minister Mr. Pranab Mukherjee 

• Bill amendment made on 2011 to include India as one of the key members of Financial Action Task Force (FATF) 

• Act provides provisions of Indian laws to comply with international laws regarding money laundering 

• Concealment, possession and acquisition of foreign assets without paying tax are defined as offence in this law 

• Fine up to 5 lacs 

• Individual property confiscation for a period not extending up to 180 days if proven offensive 

• Financial Action Task Force (FATF) 

• Inter governmental body with its origin in Paris G-7 Summit, 1989 

• Main purpose is to set standards globally on anti money laundering 

• Combating the financing of terrorist activities or terror financing 

• India joined FATF in 2010 as 34 th member nation 

• Anti money laundering conventions 

• Countering measures on terror financing with cooperation of nations 

Negotiable Instruments Bill :

• Negotiable instruments Act was introduced in 1882 

• The Act was amended on 13 th May 2015 

• Passed in the Lok Sabha 

• Explanation of promissory notes, cheque and bills of exchange amended with digital signature 

• Main aim is to create penalties for bouncing of cheques 

• Bounced Cheque issuer will be penalized by withdrawing a penalty amount from their bank accounts and also will have to pay penalty on the receiver end 

• In case of more than one instance of bouncing cheques, cases will be transferred to the appropriate courts coming under the jurisdiction 

• Bill withdrawn on 24 th July to make further instruments 

• Foreign Exchange Management Act (FEMA), 1999 

• All foreign exchange related transactions regulated by FEMA in India 

• FEMA replaced strict and restrictive control provisions of FERA, 1973 

• Ensure proper utilization of foreign transactions 

• Conserve the Forex transactions 

• Violation implies civil imprisonment if fine not paid within 90 days 

• RBI administers FEMA implementation 

• Act allows only authorized persons to deal in foreign exchange 

• Objectives of the act include external trade facilitation, promotion of foreign exchange and payments 

• RBI monitors business conduct of Indian companies outside India 

• Recently, Indian companies established abroad especially in Tax havens were taxed by RBI 

• All imports and export-related transactions come under the purview of this act 

• Functions as a watch dog mechanism in foreign exchange for India 

The Benami Transactions Bill :

• Amendment of Benami Transactions Act, 1988

• Passed in Lok Sabha by Finance Minister Mr. Arun Jaitley

• Description of Benamidar revised

• Penalty for giving false information through Benamis leads to imprisonment of 6 months to 5 years

• Fine up to 10 percent of the benami property market value

Four main authorities established to investigate or conduct inquiries : 

1. Initiating officer
2. Approving officer 
3. Administrator and 
4. Adjudicating officer 

Emerging Issues :

• Strong and quick implementation of the acts 
• Political Interference 
• Corrupt officers 
• Willful defaulters on the rise – Mr. Subroto Roy, Mr. Vijay Mallya etc. 
• Participatory notes are the main source of terror financing 
• No mention on Participatory notes in the amendments and bills introduced so far 
• Havala scandal cases 
• Illegal trading activities
• Stock market scandals 
• Smuggling and money transfer 
• Counterfeit currency 
• Bank Scandals 

The above issues indicate the urgent need for the empowerment of strong, powerful, autonomous and independent regulatory bodies like RBI, SEBI etc.