Budget 2015: Black money abroad? Be ready for 10 years of rigorous imprisonment, huge fines

MUMBAI: If you are caught with a hidden bank account in Jersey or cut a cash deal to buy a property in Panvel, chances are not just the taxman, even the cops could come after you. And if on a shopping binge you end up blowing up more than a lakh, the store will ask for your PAN to leave a trail for the tax office.
Existing laws will be tightened and new ones enacted to make life miserable for anyone with black money. Individuals being hounded by the government for stashing away money in HSBC Geneva and Liechtenstein would also be covered by the stringent laws with the income-tax department completing assessments and slapping prosecution notices.

But thanks to the abolition of wealth tax, companies may be tempted to hold more cash in hand and might even find themselves on a stronger footing if a cache of currency bills is found on the premises.

What, however, is stunning is the degree of harshness that the Modi government plans to impose as part of its attack on black money. Undisclosed foreign bank accounts or offshore properties could lead to instant arrest as these reported assets would lead to punishment under the Prevention of Money Laundering Act. "While the intent is right, we hope the government does not impose a police raj. It revives memories of FERA days," said Dilip Lakhani, a senior Mumbaibased chartered accountant.

FEMA would also be changed to empower the tax office to attach local properties and bank accounts equivalent to the value of unreported foreign assets. The government is expected to bring in a comprehensive law on black money that could override laws on income tax and foreign exchange.

At present, the income-tax department has no power to arrest. Tracking black money could be a long-drawn process involving assessment, penalty orders, appeals and inability to prosecute if the assessment is challenged in high court. The proposed law threatens to sidestep the process.

In curbing the flow of bribe money and unaccounted funds into ‘benami’ properties — registered in the name of another party — a new law would allow authorities to quickly confiscate such assets. "At present, the enforcement agency has to prove that an asset belongs to A and not B. This is not easy," said a senior officer with the tax department. Cash dealings, even genuine ones, may come down dramatically with the Budget proposing to ban cash transactions — even an advance of Rs 25,000 — for property purchase. Since the existing law prohibits cash loans and deposits above Rs 20,000, any transaction above the cut-off amount was shown as property transaction. This loophole will now be plugged.