Claiming that about $2 trillion worth of black money from India is stashed abroad, industry body Assocham on Friday said the government should float a six-month amnesty scheme to facilitate voluntary transfer of such funds back home with a payment of 40 per cent tax.
The amnesty scheme is a ‘practical and pragmatic’ approach to bring back the black money stashed abroad, the chairman of Assocham's Legal Affairs Council R K Handoo said on the sidelines of the release of a study on black money in New Delhi on Friday.
In 1997, the government had raised about Rs 10,000 crore (Rs 100 billion) through the Voluntary Disclosure of Income Scheme.
However, it sparked an outrage as there were counter arguments that schemes like VDIS penalise honest tax payers and at the same time encourage tax evaders.
The government, therefore, had given an undertaking to the Supreme Court that the VDIS was the last of its kind, and it would not bring about such schemes in future.
Handoo, however, said the government can again approach the Supreme Court for clearance and issue an Executive Order for introducing the amnesty scheme after getting permission from the apex court.
Notably, Assocham termed the estimate of $2 trillion worth of black money stashed overseas as ‘unverifiable and based on assumptions’, arrived at through studies undertaken on various reports.
The amnesty scheme suggested by the industry chamber is limited to six months and suggests a 40 per cent tax on voluntarily disclosed funds topped with a ten per cent investment of the total money brought back in infrastructure bonds.
The 40 per cent tax deduction is ten per cent above the maximum effective tax on income and would dissuade misuse of the scheme for turning internal black money into white through a transfer mechanism, according to Assocham.
Among other suggestions to curb generation of black money, the study suggests transparency in political funding by removing the election expense ceiling, real-time disclosure of all sources of funds and expenses and partial funding of election expenses for all serious candidates and parties.
Recognising that property transactions are a major source of generation of black money where widespread under reporting is common practice, the study said the government should introduce a uniform stamp duty rate of three per cent applicable across the country.
It also suggests the property circle rate be notified every year on the basis of the data input for the preceding year so as to make sure that the circle rates are as good as the prevalent market rate.
Besides, the study calls for governance measures to restrict lure of gold as a saving measure and educate families to hold savings in credible and legal financial instruments that are safe as India is the world's largest consumer of gold.