In May 2014, BJP candidate Narendra Modi promised Rs 15 lakh to every
farmer once the alleged black money stored by Indians abroad is returned to
India. In 2015, exactly a year later, the Black Money Act was passed by the
Parliament rendering storing money abroad unlawful. However, in the 5 months
since its inception in 2015, only a few crores of the money has been brought back to
India. This begs the question whether there is actually large amounts of money
in banks in Switzerland and Liechtenstein or whether a greater amount is within
the country itself?
The media hype which stemmed from
the Wikileaks and HSBC stories on the alleged bank accounts of rich Indians – nearly 700 of them abroad
including Pradip Burman, Anil Ambani and Harshad Mehta created in frenzy in the
last four years. Bringing black money back to the country became the top agenda
for Lok Sabha Elections. It was alleged that 30 lakh crore of money had
illicitly moved out of India in the last decade. All this has distorted
economic indicators of growth in India.
In 2012, the Congress Governemnt
published a White Paper highlighting various aspects of the Black Money
transactions and steps taken by the Government. However, it was much criticized
owing to its inability to address the issue- Why weren’t the laws to curb such
transactions working?
Senior Advocate Ram Jethmalani
moved to the Supreme Court of India to compel the government to bring back the
huge amounts of Black Money from other countries. Although a judgment was
passed in 2011 by the Supreme Court explaining that such transactions were
considered theft from the economy, the lathergic manner in which the directions
issued by the Supreme Court to curb black money were implemented left much to
be desired. For one, the SIT (Special Invesitgation Team) headed by Justice
M.B. Shah, a retired judge of the Supreme Court came into place three years
after the judgment was passed in 2014. Considered one of the first important
decisions of the NDA Government, the SIT has since submitted suggestions to the
Supreme Court on minimizing misuse of export import routes and imposing
thresholds of upto 15 lakh in cash to check transactions. Currently, an appeal
to the said judgment is being heard where the Supreme Court has been asked by
Ram Jethmalani to pass stronger directions to curb this menace.
Laws such as Income Tax Act, 1961
(IT Act), Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of
Money Laundering Act, 2002 (PMLA) have attempted to address the threat of black
money.
Such laws impose high penalties
and stringent penal provisions however less that 2000 crore till date have been
recovered from such laws. This gives the rise to the Black
Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
(Black Money Act or BMA).
Currently, BMA covers foreign assets
only. Hence, illicit domestic transactions of money such as investment in gold,
jewelry and precious stones, real estate transactions and election funds are
outside the scope of the BMA. Although there is a Benami Transactions
(Prohibitions) Bill, 2011 which got cleared by the Cabinet this year for
covering such domestic transactions, BMA currently has only targeted foreign
assets. Secondly, the source of participatory notes responsible for bringing
foreign portfolio investment in India is suspected to be Indians with black
money hoards abroad. This source which accounts for nearly Rs 3 lakh crore in
2015 so far is largely untraceable and not covered by law.
