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            Despite all the fanfare around the law to unearth unaccounted money and assets held by Indians abroad, the first attempt to get the owners of such wealth declare it has been a damp squib. “It has not even ski­mmed the surface (of the overall unaccounted wealth held by Indians abroad),” said Riaz Thingna, partner at Walker Chandiok and Co.

            During the three-month compliance window that was given to disclose unaccounted wealth stashed abr­o­ad, only 638 declarations amounting to Rs 3,770 crore were made, according to a statement.

            Though there are no authentic estimates of Indian wealth held abroad illegally, various gustimates suggest that it could be 1.5 times of the Indian economy.

            Revenue secretary Hasmukh Adhia has said there would be no extension of the scheme to enable more people to declare there unaccounted for foreign assets.

            Thingna said main reasons for tepid response was high tax and penalty that would have been imposed on those assets and fear of harassment under various other laws later on.

            According to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, declarants would have to pay 30 per cent of declarations as tax and another 30 per cent as penalty. “It is a high cost to take,” Thingna said.

            He said the law also does not provide complete immunity. The immunity under the law is from prosecution only under I-T Act, Wealth Tax Act, Companies Act and Customs Act. But action can be initiated against them un­d­er the Indian Penal Code and even Sebi Act if the persons involved are directors of listed firms. “People are worried that the information disclosed during co­u­ld be used to victimise or harass them later on,” he said.

            Those not using the compliance window will lose the entire asset, pay 20 per cent more on it and even face a jail-term if government gets to know of their illegally-held foreign assets from other sources.

            When the compliance window was opened the government ran an extensive campaign to get people to pay up by holding both the carrot and the stick.

            Senior tax department officials spoke at all industry gatherings and even pointed to pacts that will make hiding unaccounted assets abroad difficult. It pointed to a pact with the US under its domestic law, Foreign Account Tax Compliance Act, and a pact among ma­jor economies and tax ha­v­ens that will facilitate flow of financial information.

            Many chose to take the risk of not disclosing and may have used the long period that was available between when the government announced its intent to bring the black money bill in February and now to conceal their foreign assets under complex structures, Thin­gna said. They would have taken recourse to complex and multi-layered corporate and trust structures, for these structures are difficult to unravel, he said.

            Other route for escaping prosecution under the black money law is to transfer that asset to a family member who is a NRI as law is only applicable to resident Indians.

            The article appeared in the Financial Chronicle. The article can be found here.

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