To keep a check on black money, the Cabinet on Tuesday approved a new Bill that would give more powers to the tax department in tracking illicit wealth stashed abroad and provide for strict penal actions for such offence.
Sources said that the Cabinet approved the new Bill on Tuesday evening and it could be presented in Parliament during the ongoing session.
Finance Minister Arun Jaitley had announced in his Budget speech on 28 February that the government would bring in a comprehensive law to check the black money menace by providing for a jail term of up to 10 years for hiding foreign assets and up to 300 percent penalty.
Jaitley had also said that a host of other tough measures including dis-incentivising of cash dealings in real estate and other transactions would be put in place.
Under the proposed law, concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable with rigorous imprisonment of up to 10 years, Jaitley had said, while adding that the offence will be made non-compoundable and the offenders will not be permitted to approach the Settlement Commission.
As regards curbing domestic black money, the Finance Minister had said a new and more comprehensive Benami Transactions (Prohibition) Bill would be introduced in the current session of Parliament. He had also proposed to amend the Income-tax Act to prohibit “acceptance or payment” of an advance of Rs 20,000 or more in cash for purchase of immovable property.
Meanwhile the Cabinet also on approved the signing of an inter-governmental agreement between India and the US for implementing the Foreign Account Tax Compliance Act (FATCA). Sources said the cabinet meeting also approved India joining the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information (AEOI).
The decision will enable the government to receive information from the US and from other jurisdictions with which India has entered into agreements for AEOI as per CRS (common reporting standards) about assets of Indians held abroad including through entities in which Indians are beneficial owners.
The sources said it will help the government curb tax evasion and deal with the problems of black money.
They said it will also result in financial institutions in India being FATCA complaint and they will not be required to enter into separate agreements with the US to avoid 30 percent withholding on their US source of income.
Till now, MCAA and AEOI have been signed by 52 countries.
The sources said the government has taken a leading role in international fora towards building a consensus among major economies that the problem of offshore tax evasion and flow of illicit money can be addressed only by free flow of financial account information to be exchanged among countries on automatic basis.
Prime Minister Narendra Modi, during the G20 summit in Brisbane last year, had supported AEOI and said it will be instrumental in getting information about unaccounted money stashed abroad and its repatriation.