There is a legal framework regulated by the Reserve Bank
of India for the opening of bank accounts overseas by Indian residents and for
outward or inward remission of funds through authorized channels. The existing
legal framework for dealing with illicitly generated funds transferred overseas
and measures for the attachment and repatriation of such illegal assets to
India and provision for penalties for offenders are:
A. Under the Prevention of Money Laundering Act, 2002
(PMLA), money laundered out of predicate scheduled offences can be attached and
seized and individuals and other legal entities found to have indulged in money
laundering can be prosecuted. PMLA provides for imprisonment of minimum of 3
years (which can be extended up to 7 years) and a fine of up to Rs.5 lakh and
the tainted proceeds parked overseas can be recovered through Mutual Legal
Assistance Treaties. India has such treaties with 26 countries.
B. Under the Foreign Exchange Management Act, 1999
(FEMA), cases relating to contravention in foreign exchange transactions by
Indian residents can be adjudicated with penalty up to a maximum of 3 times the
amount involved. Further, FEMA empowers the confiscation of the amounts lying
abroad and directing their repatriation.
C. Under both statutes (FEMA and PMLA), investigation is
taken up against specific persons, both natural and legal, and on the basis of
specific information.
D. Section 105A of the Cr. PC provides for reciprocal
arrangement and procedure for attachment and forfeiture of properties generated
from the commission of an offence. Where such properties are situated overseas
and treaty arrangements exist between Government of India and the other
country, Letter Rogatories can be issued to a court / authority of the other
country for execution of such an order.
E. Under the Income Tax Act also, income earned and not
disclosed is taxable and also subject to penalty and interest, as well as
prosecution. The amount recovered may even exceed the entire undisclosed
income. This is in effect confiscation of such income / property.
Actions at hand I. India has negotiated / renegotiated
Double Tax Avoidance Agreements and finalized Tax Information Exchange
Agreements with 44 countries so as to strengthen the exchange of information
relating to tax evasion, money laundering and other criminal / illicit
activities.
II. Agencies enforcing these laws have been strengthened and
action is being taken in all cases where credible information is available. In
the last two years, over Rs 33,000 crore of mispricing has been detected in
international trade and over Rs 30,000 crore of tax evasion detected
domestically.
III. Government has commissioned a study, to be completed
within 18 months, by three national-level institutes to assess the extent of
black money inside and outside the country and its impact on national security.
The study will also indicate the sectors and mode of generation of black money
and recommend measures for its prevention and control.
IV. The Direct Taxes Code Bill, as introduced in
Parliament, contains provisions for mandatory declaration of assets held abroad
by taxpayers in India. It also contains provisions such as General Anti
Avoidance and Thin Capitalization Rules to combat illicit transfer of money and
assets abroad through complex financial arrangements and instruments.
V. A Directorate of Criminal Investigation has been
created in the Central Board of Direct Taxes as a dedicated unit to track
financial transactions relating to illegal / criminal activities and bring such
activities to justice.
VI. A High Level Committee has been constituted under the
Revenue Secretary for effective sharing of information among Law Enforcement
Agencies for coordinated investigation / prosecution of economic offences.
A Joint Working Group (JWG) was constituted in 2006 for
the purpose of renegotiating the Direct Taxation Avoidance Convention with
Mauritius and its last meeting was held in 2008. Thereafter, India has
successfully used the mechanism of the Peer Review Group (PRG) of the Global
Forum for Transparency and Exchange of Information for Tax Purposes – of which
India is Vice Chair – to leverage arguments with the Mauritian side to be more
open in furnishing tax related information to India.
Recently, during the visit of President of Mauritius in
end-April, an indication was received that Mauritius would resume the Joint
Working Group dialogue on the DTAC. Further, Foreign Minister of Mauritius has
conveyed that his government will give a fresh mandate for the resumed
negotiations to their experts. This position has been further confirmed by the
Prime Minister of Mauritius to the Indian Minister of State for External
Affairs on 16th May 2011 during her visit to Mauritius.
Hon’ble Supreme Court in the case of Azadi Bachao Andolan
Vs Union of India (2003) endorsed the Mauritius route for investments into
India for availing of the capital gains tax exemption. Hence, any change in the
law relating to Mauritius can only have prospective application and can be in
respect of future holdings/accounts/entities in Mauritius. Proposed Action In
order to strengthen existing laws relating to black money, the government has
constituted a Committee to consult all stakeholders and submit its report within
a period of six months. The Committee will examine the measures to strengthen
the existing legal and administrative framework to deal with the menace of
generation of black money through illegal means including, inter alia, a)
Declaring wealth generated illegally as national asset; b) Enacting / amending
laws to confiscate and recover such assets; and c) Providing for exemplary
punishment against its perpetrators.
Any further suggestions in this regard will be duly
considered. Collection of details regarding people who go frequently to ‘tax
havens’. Government proposes to expand its Immigration/Emigration databases and
build a database of Indians going frequently to foreign countries considered to
be tax havens and returning to India. Lok Pal Bill A Joint Drafting Committee,
consisting of Government and civil society representatives is already looking
into the provisions of the Bill. Government is committed to the widest possible
consultation on the Lok Pal Bill before its introduction in Parliament and
subsequently until the passage of the Bill. As a first step, State Governments
and political parties are being consulted. Further consultations with the
public will follow. Stronger punishment for the corrupt This is also under
consideration of the Joint Drafting Committee. The maximum punishment for cases
of corruption would be increased substantially. It may be noted that money
secured through corrupt modes can now be confiscated under the Prevention of
Money Laundering Act and some cases have already been taken up under these
provisions. Besides, the Department of Personnel is also considering the
inclusion of a chapter in the Prevention of Corruption Act to provide for
confiscation of ill-gotten wealth. Special Courts for dealing with corruption
cases Government has already decided to set up 71 new special courts for trial
of CBI cases. The number of public prosecutors, inspectors, head constables and
stenographers for additional special courts has been increased. Government is
open to the idea of more special courts to speed up trial of corruption cases.
Public Services Delivery Act Various initiatives have
already been taken by Government, including Citizens’ Charters, Sevottam and
the recently introduced performance management & evaluation system. The
Central Government is prepared to introduce a Public Services Delivery Bill in
Parliament at the earliest and to prepare a Model Bill for adoption by State
Governments. The Central Government will encourage State Governments to adopt
the Model Bill to improve the quality and timeliness of public service
delivery. Technical Education in Indian Languages The Commission for Scientific
and Technical Terminology has been set up with a mandate of providing more
regional language material in technical subjects. The Commission’s work will be
strengthened and speeded up. The National Translation Mission under the Central
Institute of Indian Languages, Mysore will also be strengthened. It may be
noted that the Civil Services Examination is now held in Hindi as well as in
regional languages. Similarly, Hindi is a medium for writing the IIT-JEE
examination. The All India Engineering Entrance Examination, in which more than
11 lakh students appear each year, also offers Hindi as a medium. NCERT
provides text books in Hindi and Urdu. In Tamil Nadu, Tamil is a medium of
instructional examination for degree courses for technical education.
Similarly, in the States of Rajasthan, Uttar Pradesh, Haryana, Bihar and Madhya
Pradesh, the regional language is a medium of instruction and for examination
in diploma level courses in technical education. In addition to all these
initiatives, the Ministry of Human Resource Development has asked AICTE, which
is charged with the duty of determining and maintaining standards of technical education
in the country to constitute a Committee of Experts to draw up a concrete plan
for measures to be taken to increase the use of Indian languages in technical
education. This Committee will submit its report in 3 months. 6 Land
Acquisition Act The Act is in the process of amendment and any suggestions
regarding its provisions can be considered for inclusion. Government is
committed to wide public consultation on the amendments to the Land Acquisition
Act. Agriculture Government has already initiated several projects for
promotion of organic farming and the use of bio-pesticides and bio-fertilizers.
This includes the National Project on Organic Farming, National Horticulture
Mission and the Rashtriya Krishi Vikas Yojana. As a result, organic farming which
only covered 42000 hectares in 2004-05, now covers 10.8 lakh hectares. Nine
States have drafted organic farming policies. There has been substantial
increase in production of compost, bio-fertilizers and development of
vermiculture. To sustain agricultural productivity in the long run and to
address soil health issues, Government is giving special thrust to organic
farming under the National Mission on Sustainable Agriculture and is promoting
farming practices like green manuring, biological pest control and so on. These
measures will be further strengthened and outlays increased. Minimum support
prices are even now based on cost calculations. Elaborate studies are conducted
by the Commission on Agricultural Costs & Prices each year before Government
finalizes the minimum support prices. These cost studies form the basis of the
minimum support prices that are announced. The labour put in by the farmers is
also part of the costs. Government will facilitate explanation of the
methodology followed by the Commission at the technical level.
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