Black Money – Domestic and International Efforts

Jun, 26, 2019

[pib] Surjit Bhalla Committee on Trade and Policy


  • High Level Advisory Group (HLAG) headed by Dr. Surjit S. Bhalla has been constituted by the Department of Commerce.

Surjit Bhalla Committee Recommendations

  • The HLAG has made several recommendations for boosting India’s share and importance in global merchandise and services trade.
  • Among other things, the Report identifies tax reforms also to boost export and investment channels for exports.
  • The Committee has recommended “Elephant Bonds” as a specialised security product providing funds towards Long Term Infrastructure.
  • HLAG has also made recommendations for reforms in Financial Services Framework for making India a Preferred Destination for financial services.

About Elephant Bonds

  • Elephant Bonds are the 25-year sovereign bonds in which people declaring undisclosed income will be bound to invest 50 per cent.
  • The fund, made from these bonds, will be utilized only for infrastructure projects.
  • It is like an Amnesty scheme to help State treasury raising tax revenues, adding beneficiaries in tax base who have not declared their assets previously.
May, 25, 2019

Elephant Bonds


  • A high level government-appointed committee on trade and industry has suggested it to issue ‘Elephant Bonds’ to people for declaring undisclosed income to mandatorily invest 50%.

Elephant Bonds

  • Elephant Bonds are the 25-year sovereign bonds in which people declaring undisclosed income will be bound to invest 50 per cent.
  • The fund, made from these bonds, will be utilized only for infrastructure projects.
  • It is like an Amnesty scheme to help State treasury raising tax revenues, adding beneficiaries in tax base who have not declared their assets previously.
Oct, 25, 2018

Adjudicating body for benami cases cleared


Mains Paper 2: Governance | Important aspects of governance, transparency & accountability

From UPSC perspective, the following things are important:

Prelims level: Features of the Tribunals

Mains level:  Legal Provisions for speedy trial of Black Money cases in India


Appellate Tribunals against Benami Transactions

  1. The Union Cabinet has approved setting up of Appellate Tribunal and Adjudicating Authority for speedy disposal of cases related to benami transactions.
  2. Earlier the cabinet had notified sessions courts in 34 states and Union Territories, which will act as special courts for trial of offences under the benami transaction law.
  3. The rules and all the provisions of the Benami Transactions (Prohibition) Act came into force on November 1, 2016.

Salient Features

  1. Under the Prohibition of Benami Property Transactions Act of 1998, the government will appoint Adjudicating Authority Appellate Tribunal.
  2. The officials will come from the existing posts at the same level from the Income Tax Department and the Central Board of Direct Taxes.
  3. The Adjudicating Authority and Appellate Tribunal will be based in the National Capital Territory of Delhi (NCTD).
  4. Benches of Adjudicating Authority may sit in Kolkata, Mumbai and Chennai, and the necessary notification in this regard will be issued after consultation with the Chairperson of the proposed Adjudicating Authority.

Benefits of the Tribunals

  1. The approval will result in effective and better administration of cases referred to the Adjudicating Authority and speedy disposal of appeals filed against the order of the Adjudicating Authority before the Appellate Tribunal.
  2. It would provide first stage review of administrative action under the PBPT Act.
  3. Establishment of the proposed Appellate Tribunal would provide an appellate mechanism for the order passed by the Adjudicating Authority under the PBPT Act.
Oct, 23, 2018

Centre notifies special courts for benami transaction cases


Mains Paper 2: Governance | Important aspects of governance, transparency & accountability

From UPSC perspective, the following things are important:

Prelims level: Provision of special courts

Mains level:  Legal Provisions for speedy trial of Black Money cases in India



  • The central government has notified Sessions courts in 34 states and Union Territories, which will act as special courts for trial of offences under the benami transaction law.

Benami Transactions

  • Benami transaction refers transactions made in a fictitious name, or the owner is not aware of the ownership of the property, or the person paying for the property is not traceable.

Special Courts to try Benami Transactions Cases

  1. The court (s) of Session in the states and UT were notified after consultation with Chief Justices of respective High Courts under the Prohibition of Benami Property Transactions Act, 1988 (45 of 1988) for the trial of offences punishable under the provisions of the Act.
  2. In case of National Capital Territory of Delhi, Courts of Additional Sessions Judge 02 in each district have been designated as special court.
  3. The law prescribes that every trial should be conducted “as expeditiously as possible” and every endeavour should be made by the Special Court to conclude it within six months from the date of filing of the complaint.

Legislation to curb Black Money

  1. With a view to curb the menace of black money, Parliament in August 2016 had passed the Benami Transactions (Prohibition) Act.
  2. The rules and all the provisions of the Benami Transactions (Prohibition) Act come into force on November 1, 2016.
  3. After coming into effect, the existing Benami Transactions (Prohibition) Act, 1988, was renamed as the Prohibition of Benami Property Transactions Act, 1988.
Jun, 30, 2018

Global funding watchdog hands 10-point plan to Pakistan


Mains Paper 2: IR | Important International institutions, agencies & fora, their structure, mandate

From UPSC perspective, the following things are important:

Prelims level: FATF

Mains level: International initiatives to combat terror financing and black money


FATF action on Pakistan

  1. The Financial Action Task Force (FATF) has unanimously agreed to put into effect its February decision to place Pakistan in the greylist for inaction against terror funding
  2. It has laid out a 10-point action plan for compliance with its guidelines
  3. Pakistan’s failure in implementing the elaborate action plan may result in it being included in the blacklist next year

Important highlights of the plan

  1. The country has been instructed to take measures demonstrating that UN-designated terrorists and banned terror outfits are deprived of their resources and their sources of funding are choked
  2. Pakistan will have to take steps to ensure that terror funding risks are properly identified, assessed and that supervision is applied on a risk-sensitive basis
  3. It will also be required to show that remedial measures are being taken to prevent financial institutions from indulging in money laundering and terror funding
  4. The country will have to take stringent action against illegal financial operations, identify cash couriers and enforce controls on illicit movement of currency


Financial Action Task Force (FATF)

  1. FATF is an inter-governmental body established in 1989 by the Ministers of its Member jurisdiction
  2. The FATF is a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas
  3. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system
  4. The FATF has developed a series of Recommendations that are recognised as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction
  5. The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally
  6. The FATF’s decision-making body, the FATF Plenary, meets three times per year
May, 14, 2018

Govt. regulators mull ‘shell firm’ definition


Mains Paper 3: Internal Security: Money Laundering

From UPSC perspective, the following things are important:

Prelims level: Shell companies

Mains level: Issues associated with these companies and government action against them.


Lack of proper definition impeding government action

  1. As multiple agencies and regulators probe the suspected use of ‘only-on-paper’ firms for financial irregularities, the government is looking to put in place a proper definition for ‘shell companies’ so that investigations are not hampered and prosecution can withstand scrutiny in courts of law
  2. A key issue has been lack of a proper and uniform definition for ‘shell companies’ — a term generally used for companies that are set up for financial maneuverings only or are kept dormant for some future use
  3. These companies generally exist only on paper and may be used for nefarious activities

Recommendations of Task Force on Shell Companies

  1. The Ministry of Corporate Affairs has received preliminary suggestions from a multi-agency task force comprising officials from the Enforcement Directorate, Financial Intelligence Unit, Directorate of Revenue Intelligence, capital markets regulator SEBI and the Income Tax Department
  2. Definitions under consideration include those from the Organisation for Economic Cooperation and Development, which has defined a shell company as being formally registered, incorporated or otherwise legally organized in an economy but which does not conduct any operations in that economy other than in a pass-through capacity
  3. SEBI has suggested entities having no significant operational assets or business activity but acting in a pass-through capacity as conduits may be thus defined
Apr, 16, 2018

Prevention of Money Laundering Act will need more changes


Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: Financial Action Task Force (FATF), Enforcement Directorate

Mains level: Measures taken by India to prevent money laundering


PMLA needs to be more robust

  1. India will have to make money laundering an explicitly standalone offense
  2. This has to be done in order to upgrade its compliance ahead of the on-site mutual evaluation by the Financial Action Task Force (FATF), which is due in November-December 2020

What is the issue?

  1. Despite several amendments, the Prevention of Money Laundering Act (PMLA) remains a predicate-offense-oriented law
  2. This means a case under the Act depends on the fate of cases pursued by primary agencies such as the CBI, the Income Tax Department or the police
  3. The predicate offense conviction condition creates fundamental difficulties when trying to confiscate the proceeds of crime in the absence of a conviction of a predicate offense
  4. Among the key recommendations of the FATF is that money laundering be made a standalone offense

Authority to probe money laundering

  1. The Enforcement Directorate is empowered to investigate the financial aspects of those crimes, as defined under the other penal laws, which are listed in the PMLA schedule


Financial Action Task Force (FATF)

  1. FATF is an inter-governmental body established in 1989 on the initiative of the G7 to develop policies to combat money laundering
  2. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system
  3. The FATF is, therefore, a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas
  4. The FATF has developed a series of Recommendations that are recognized as the international standard for combating of money laundering and the financing of terrorism and proliferation of weapons of mass destruction
  5. The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally
  6. The FATF’s decision-making body, the FATF Plenary, meets three times per year
Mar, 23, 2018

Govt asks NBFCs to report details of clients to FIU-IND


Mains Paper 2: Polity | Statutory, regulatory & various quasi-judicial bodies

From UPSC perspective, the following things are important:

Prelims level: NBFCs, FIU-IND

Mains level: Money laundering and measures to curb it


NBFCs to register with the country’s financial intelligence unit

  1. The government has asked non-banking financial companies (NBFCs) to register with the country’s financial intelligence unit (FIU-IND)
  2. They have to report details of clients as per the requirements under the Prevention of Money Laundering Act

Why this move?

  1. As unregistered NBFCs remain outside the reporting ambit of FIU-IND, they pose a risk to the integrity of the country’s financial system
  2. Last month, FIU-IND had put out a list of nearly 9,500 NBFCs who were non-compliant
  3. The list has been published by FIU-IND to enable the bankers to conduct enhanced due diligence of the transactions carried out by such NBFCs


Financial intelligence unit (FIU-IND)

  1. Financial Intelligence Unit – India (FIU-IND) was set by the Government of India vide O.M. dated 18th November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions
  2. The main function of FIU-IND is to receive cash/suspicious transaction reports, analyze them and, as appropriate, disseminate valuable financial information to intelligence/enforcement agencies and regulatory authorities
  3. FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering and related crimes
  4. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister
  5. FIU-IND is a multidisciplinary body with personnel being inducted from different organizations namely Central Board of Direct Taxes (CBDT), Central Board of Excise and Customs (CBEC), Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Department of Legal Affairs and Intelligence agencies
Feb, 02, 2018

Govt proposes key amendments to PMLA


Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: PMLA, Finance Bill

Mains level: Measures to combat black money


Proposal to set up special courts

  1. The Central government has proposed changes to various provisions of the Prevention of Money Laundering Act (PMLA) through the Finance Bill
  2. A proposed crucial amendment empowers the Special Court to restore confiscated assets to the rightful claimants even during the trial
  3. Earlier, the assets could be restored only after completion of the trial

Sharing of details mandatory

  1. The government has introduced a new Sub-Section (2) of Section 66, making it mandatory for the ED to share relevant details with other agencies
  2. PMLA proceedings will be de-linked from those with scheduled offences pursued by other agencies
  3. There will be uniform applicability of bail conditions, instead of only those crimes listed in its schedule
  4. A limit of ₹1 crore in the alleged offence would allow the court to apply bail provisions more leniently to less serious PMLA cases

Why lenient bail conditions?

  1. The proposal comes after the Supreme Court recently struck down the previous provision
  2. The previous provision could deny bail even when there were sound grounds to believe that a person was not involved in money laundering

ED can take up cases outside country also

  1. A change is proposed change in the definition of “proceeds of crime”
  2. It now also allows the ED to proceed against assets of equivalent value located even outside the country


Prevention of Money Laundering Act (PMLA)

  1. Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India to prevent money-laundering and to provide for confiscation of property derived from money-laundering
  2. The Act and Rules notified thereunder impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information in prescribed form to Financial Intelligence Unit – India (FIU-IND)
  3. The PMLA seeks to combat money laundering in India and has three main objectives:-To prevent and control money laundering

    -To confiscate and seize the property obtained from the laundered money; and

    -To deal with any other issue connected with money laundering in India

Finance Bill

  1. A Finance Bill is a Money Bill as defined in Article 110 of the Constitution
  2. The proposals of the government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill
  3. The Finance Bill can be introduced only in Lok Sabha
  4. The Rajya Sabha can recommend amendments to the Bill
  5. The bill has to be passed by the Parliament within 75 days of its introduction
Dec, 26, 2017

‘Condonation of delay scheme only for bona fide directors’


Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation.

From UPSC perspective, the following things are important:

Prelims level: Condonation of Delay Scheme, Director Identification Number

Mains level: Measures being undertaken to curb illicit fund flows


Condonation of Delay Scheme

  1. The proposed scheme will provide a three-month window for defaulting companies to submit their filings
  2. It would be rolled out by the Ministry of Corporate Affairs
  3. It is to be operational from January 1 to March 31, 2018

Why this scheme?

  1. As part of clamping down on illicit fund flows, the corporate affairs ministry has disqualified more than 3.09 lakh directors of companies which failed to submit annual filings for a long time
  2. Following the move, concerns were raised that many directors of genuine companies have also been disqualified
  3. Besides, some individuals moved courts against their disqualification

Working of scheme

  1. Only bona fide directors will benefit from the proposed scheme
  2. The Director Identification Numbers of disqualified directors that have been deactivated would be ‘temporarily activated’ during the scheme period
  3. After submitting the filings under the scheme, a company concerned would have to file a separate form seeking condonation of the delay along with a fee of ₹30,000


Director Identification Numbers

  1. Director Identification Number (DIN) is a unique identification number given to an existing or a potential Director of any company which is incorporated
  2. DIN came into existence after the insertion of the section 266A & 266B of the Companies Act, 1956 (as amended vide Act No 23 of 2006)
Dec, 22, 2017

Black money: India-Swiss data sharing from Jan. 1


Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: Global standards for Automatic Exchange of Information

Mains level: Measures being undertaken to combat black money


Combating black money stashed abroad

  1. India signed an agreement with Switzerland that would allow automatic sharing of tax-related information from January 1 next year
  2. A joint declaration for the implementation of Automatic Exchange of Information was signed last month between the two sides

About the data exchange

  1. Both countries would start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards

Read background of the issue here

Nov, 20, 2017

Swiss parliamentary panel okays auto info exchange with India


Mains Paper 2: IR | Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Important pact against black money


Big step against Black Money

  1. A key parliamentary panel in Switzerland has approved an automatic information exchange pact between the two countries
  2. It will pave the way for India to get instant access to details on Indians with Swiss accounts

Same pact with 40 countries

  1. The Commission for Economic Affairs and Taxes of the Council of States approved the proposed pact with India as also with 40 other countries
  2. The commission is a key panel of the Swiss Parliament’s Upper House

What now?

  1. The proposal will now be submitted for approval from the upper chamber of Swiss Parliament, the Council of States, in the winter session beginning November 27

How will the exchange work?

  1.  If an Indian has a bank account in Switzerland, the bank concerned will disclose the financial account data to authorities there
  2. the Swiss authority will automatically forward the information to its peer in India who can then examine the person’s details


  1. The issue of black money has been a matter of big debate in India, and Switzerland has been long perceived as one of the safest havens for the illicit wealth allegedly stashed abroad by Indians
  2. To help check cross-border tax evasion, nearly 100 countries, including India and Switzerland, have so far committed to adopt this global standard for the automatic exchange of information (AEOI)
Nov, 07, 2017

Sebi, income tax dept to probe Indians named in Paradise Papers


Mains Paper 3:  Money laundering and its prevention.

The following things are important from UPSC perspective:

Prelims: International Consortium of Investigative Journalists (ICIJ), CBDT, SEBI

Mains level: It is important to know how CBDT, SEBI and the government are planning to crackdown on companies and individuals evading taxes. This article talks about the Paradise paper leak which seconds such big leak disclosure by ICIJ since Panama paper leaks of 2015.



Paradise Paper Leak

  1. The income-tax department and the capital markets regulator said they will be scrutinizing the so-called Paradise Papers, documents obtained by a global network of investigative journalists to see if any Indian individual or companies were guilty of wrongdoing.
  2. While the income-tax authorities will investigate companies allegedly evading taxes by using complex offshore structures, the market regulator will be scrutinizing disclosures.

Steps Taken by CBDT

  1. The Central Board of Direct Taxes (CBDT) has asked its investigation wing to reopen the income-tax returns filed by the companies and individuals named in the leaks to see if any of their past incomes have gone un-taxed.
  2. It has also briefed all directors general of investigations across the country about the exposé by the International Consortium of Investigative Journalists (ICIJ). These reports have not named all the companies and directors in those companies.
  3. Wherever names are available their income-tax returns will be checked to see if there is any under-reporting of income.
  4. Also, once more details and names come out, the tax department will take appropriate action.
  5. The Indian Express reported that 714 Indian companies and individuals are listed in the documents.
  6. The CBDT has also reconstituted the multi-agency group headed by its chairman to monitor investigations into the papers. Previously this group made up of officials from the tax department, the Enforcement Directorate, the Reserve Bank of India and the Financial Intelligence Unit had monitored investigations into the so-called Panama papers, another set of financial documents leaked from a Panamanian law firm in 2015, dealing with offshore assets allegedly held by businesses.

Steps taken by SEBI

  1. The Securities and Exchange Board of India (Sebi) has initiated an examination of the listed companies mentioned in the Paradise Papers for disclosure lapses and fund diversion.
  2. Sebi will ask stock exchanges to ask for information from the listed companies on their offshore entities and this will be matched with their statutory disclosures.
  3. These disclosures are made by companies in their annual reports and exchange filings.
  4. Mere existence of an offshore entity is not an offence but not disclosing it is in violation of Sebi Act.

Steps taken by the Government

  1. India renegotiating its tax treaty with countries such as Mauritius, a major source of foreign direct investment into India.
  2. India is also renegotiating its bilateral investment protection agreements with other nations to check abusive practices by businesses.
  3. In June, India joined a multilateral agreement to combat aggressive tax avoidance by multinationals, which at one stroke modified India’s DTAAs with about 93 nations, including Cyprus, Mauritius and Singapore.
  4. The country also actively participated in evolving the treaty text with members of the Organisation of Economic Cooperation and Development

Not all cases mentioned in the Paradise Leak are fraudulent

  1. It may be the case that many cases listed in the Paradise Papers may not actually be tax frauds as setting up holding companies in countries with which India has double tax avoidance agreements (DTAAs) to route investments into India has been a common tax planning practice.
  2. In the investigations into the Panama Papers, the income-tax department found that about 279 cases were “non-actionable”. In the 46 cases in which action has been taken, five criminal cases were filed and investigations are ongoing in other cases.
  3. Indian companies and individuals are allowed to invest abroad but regulations require these outbound capital flows to be reported in tax returns.
  4. Structured data connected to the Paradise Papers investigation will be released only in the coming weeks on the offshore leaks website of ICIJ in phases.


The International Consortium of Investigative Journalists (ICIJ)

  1. It is a global network of more than 200 investigative journalists in 70 countries who collaborate on in-depth investigative stories.
  2. Founded in 1997 by the respected American journalist Chuck Lewis, ICIJ was launched as a project of the Center for Public Integrity, focusing on issues that do not stop at national frontiers: cross-border crime, corruption, and the accountability of power.
  3. In February 2017,ICIJ was spun off to become a fully independent news organization with the goal of extending our global reach and impact even farther.
  4. ICIJ was recently granted its own nonprofit status from U.S. tax authorities.
  5. ICIJ is governed by three committees – a traditional board of directors with a fiduciary role; an Advisory Committee made of supporters and experienced investigative journalists; and an ICIJ Network Committee.
Nov, 06, 2017

Deregistered firms deposited Rs 17,000 crore post note ban


Mains Paper3: Indian Economy | Isues relating growth and development.

The following things are important from UPSC perspective:

Prelims: National Finance Reporting Authority

Mains level: This article highlights the steps initiated by the government to curb the menace of money laundering post demonetization.




  • According to the Finance Ministry cash deposits worth over Rs 17,000 crore were made and later withdrawn post demonetisation by as many as 35,000 companies, which are now deregistered.


  • Preliminary enquiry on the basis of information received from 56 banks in respect of 35,000 companies involving 58,000 accounts has revealed that an amount of over Rs 17,000 crore was deposited and withdrawn post demonetisation.
  • Last November, the government cancelled old Rs 500 and Rs 1,000 currency notes as legal tenders as part of larger efforts to fight the black money problem and corruption.

Steps taken by the government to curb the menace of black money

  1. The government said that 2.24 lakh companies that have been inactive for long have been struck off from official records and 3.09 lakh directors have been disqualified.
  2. To further curb the menace of shell companies used to illegally route money, the government plans to set up a National Financial Reporting Authority to test check company statements, empower the SFIO officials to arrest errant directors and limit creation of multiple levels of subsidiary companies typically used to mask the main corporate structure.
  3. In the light of the evidence with respect to abuse of the Corporate Structure through multi-layering, not more than two (2) layers are now permitted beyond the wholly owned subsidiary.
  4. This is in addition to the existing restriction which prohibits a company to make investment through more than two layers of investment companies.
  5. In order to address the criminality angle, the Director, Additional Director or Assistant Director of SFIO have been recently authorized to arrest any person believed to be guilty of any fraud punishable under the (Companies) Act.
  6. Under Section 447 of the Act, which defines fraud, stringent punishment including imprisonment up to 10 years is stipulated.
  7. Further, reference has been made to the Ministry of Finance to include it as a Scheduled Offence under the Prevention of Money Laundering Act.
  8. Also, to keep a tab on dummy directors being appointed to the boards of corporates, work is on to put in place a mechanism wherein new applications for directorship would be linked with PAN and Aadhaar numbers of the individual concerned.
  9. The government has initiated steps to disqualify directors who are on the boards of the companies that failed to file annual returns for three financial years — FY14 to FY16.


Nov, 06, 2017

Why Paradise Papers matter: they lift the veil for regulators to peek in

Image source


Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: International Consortium of Investigative Journalists (ICIJ), round tripping, double-taxation avoidance agreements (DTAAs), general anti-avoidance rule (GAAR), FATCA, common consolidated corporate tax base (CCCTB), Direct Taxes Code Bill, 2010

Mains level: Various measures to counter tax avoidance and results of these measures


What are the Paradise Papers?

  1. A trove of 13.4 million corporate records, primarily from Bermuda firm Appleby, as well as from Singapore-based Asiaciti Trust and corporate registries maintained by governments in 19 secrecy jurisdictions, often referred to as “tax paradises”
  2. The leaks — which constitute the most detailed revelations ever of such records — were obtained by the German newspaper Süddeutsche Zeitung, and shared with the International Consortium of Investigative Journalists (ICIJ)

How are Paradise Papers different from Offshore Leaks (2013), Swiss Leaks (2015) and Panama Papers (2016)?

  1. Paradise Papers also reveal tracks of veiled offshore financial activities
  2. But unlike in the previous leaks, the latest revelations are more about mega corporates than individual players and how they took advantage of and, in many cases, misused offshore jurisdictions

What do the Paradise Papers show?

  1. They reveal offshore footprints of some of India’s major corporate players as well as of a few high-value individuals — the astounding scale of incorporating shell overseas companies to various ends
  2. Appleby itself red-flagged round tripping on occasion by questioning if offshore funds meant for investing in India were sourced from India
  3. There are instances of assets of Indian companies being used to guarantee loans raised by offshore companies without disclosing it to Indian regulators
  4. Changing ownership of offshore companies to actually change the ownership of shares held by them in Indian companies without paying taxes in India turns out to be another common malpractice

Is it illegal to set up offshore companies?

  1. India has double-taxation avoidance agreements (DTAAs) with several countries with lower tax rates than its own
  2. Companies — overseas corporate bodies (OCBs) — incorporated in such countries can use their tax residency certificates (TRC) to enjoy the tax benefits available legally

Laws related to financial affairs of company

  1. A company is entitled to arrange its financial affairs in whichever way it wishes to reduce its tax liability
  2. Merely the fact that the motive for a particular transaction is to avoid tax does not invalidate the transaction unless the law of the land specifically says so
  3. According to the Westminster principle, if a document or transaction is genuine, courts or the regulator cannot go behind it to look for any supposed underlying substance
  4. Only if a fraud is established can a court or regulator pierce the corporate structure
  5. In such cases, the principle of lifting the corporate veil or the doctrine of (economic) substance over (legal) form can be applied

Revelations done by Paradise papers

  1. The Papers revealed that many offshore companies are “sham” entities engaged in tax evasion/avoidance, manipulation of the market, money laundering, round tripping (taking untaxed money out of the country through inflated invoices and then bringing it back as investment), parking black money, bribing, etc.
  2. Such insight into corporate ingenuity allows regulators to step in, besides strengthening the case for better laws and global tax reforms

Global laws against tax avoidance

  1. Laws specifying general anti-avoidance rule (GAAR) are in force in countries like the UK, Canada, Australia, New Zealand, South Africa and Hong Kong
  2. There is FATCA in the US
  3. In Europe, anti-tax avoidance measures in the pipeline include a blacklist of offshore tax havens and a common consolidated corporate tax base (CCCTB) for the EU, meant to block transfer of profit to low-tax jurisdictions
  4. India’s Direct Taxes Code Bill, 2010 envisages creation of an economically efficient, effective direct tax system, proposing GAAR to prevent tax avoidance
  5. GAAR came into effect on April 1, 2017. India introduced this retrospective clarification to the I-T Act to ensure that cross-border transactions of assets would be taxable if they derive, directly or indirectly, their value substantially from assets located in India
Oct, 07, 2017

Noose tightens around 5,800 shell firms

Image Source


Mains Paper 2: Governance | Citizens charters, transparency & accountability and institutional and other measures

From UPSC perspective, the following things are important:

Prelims level: Read B2B.

Mains level: One more step by the government to counter money laundering, black money issues.


Collection of data

  1. The government has collected startling data on multiple accounts of 5,800 shell companies
  2. These 5,800 companies are from those 200,000 companies which were struck off by the registrar of companies (RoC)

How government got these shell firms?

  1. The government had asked for data from banks about over 200,000 companies whose accounts were frozen
  2. The data from 13 banks reveals that 5,800 companies have more than 12,000 accounts
  3. The companies deposited and withdrew huge amounts from banks post-demonetisation, while they had meagre deposits before November 8, 2016
  4. According to an official statement these companies, deposited more than Rs 4,570 crore in their accounts and withdrew Rs 4,552 crore, post-demonetisation
  5. Before demonetisation, these companies had a balance of Rs 22.05 crore, in banks

Other steps taken by the government

  1. The investigative agencies have been asked(by the government) to complete necessary investigation in a time-bound manner
  2. The government also disqualified a number of directors associated with these companies. There are around 100,000 directors


Recently, we have written a newscard on the same issue. Complement this with that newscard. It will help you to understand the issue.
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Sep, 06, 2017

Centre asks banks to restrict accounts of 2.09 lakh firms

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Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: Not Much

Mains level: Effective step to curb Money Laundering and Black Money.


Restrictions on Transactions

  1. The finance ministry has advised all banks to take immediate steps to restrict transactions in bank accounts of more than 2.09 lakh companies
  2. The name of these companies have been struck off the Register of Companies

Other Directions by the Finance Ministry

  1. Banks have also been advised to step up due diligence while dealing with all firms in general
  2. And been alerted that even if a firm is ‘active’ in the corporate affairs ministry database, it should be seen with ‘suspicion’ if it has failed to file statements or returns
Aug, 03, 2017

[op-ed snap] How to curb ‘invisible money’

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Mains Paper 2: Polity | Statutory, regulatory and various quasi-judicial bodies.

Q.)  “The power to frame rules under the Representation of People Act, 1951 has not been given to the EC by successive governments.” Examine Critically.

From the UPSC perspective, the following things are important:

Prelims level: Particulars of the RP Act,  Law commission, Election Commission

Mains level: The article gives important facts on the reasons behind increasing invisible money in Elections.



  1. The article is regarding the reforms suggested by Election and Law Commission, and Government’s non-compliance on them
  2. This non-compliance is increasing Invisible money in Elections

Power given to EC, under the RP Act

  1. The Election Commission (EC) works in accordance with
    (1) Article 324
    of the Constitution of India,
    (2) the Representation of the People Act (RP Act), 1951
    (3) the rules framed by the government thereunder, and various judgments of the Supreme Court and High Courts
  2. The power to frame rules under the RP Act has not been given to the EC by successive governments

Status of reforms suggested by the EC

  1. E.C sent 22 proposals in 2004
  2. In December 2016, it sent 47 proposals including those for “Election expenses and election petitions”, “Election campaign and advertisements”, and “Reforms relating to political parties”
  3. There are also instances where the Supreme Court has directed reforms in its decisions, but parliament made laws to prevent implications of the judgments
  4. Most of the reform proposals by the EC have not been acted upon

Two proposals by the government in this budget which increase invisible money in Election

(a) to remove the limit of 7.5% on profits that a company can donate to a political party, and
(b) to remove the requirement that the company making a donation to a political party disclose the name of the party and the amount donated

Suggestions by the Law commission

  1. A logical and simple way of introducing financial transparency and accountability in the working of the political parties is recommended by the Law Commission
  2. Suggestion: is to bring political parties under the Right to Information (RTI) Act, 2005
  3. The Central Information Commission (CIC) had also said in a full bench decision in June 2013 that six national political parties were indeed ‘public authorities’ under the RTI Act
  4. Why: Because they fulfilled all conditions specified in Section 2(h) of the RTI Act which defines ‘public authority’
  5. Reaction from Political Parties: Despite this decision, political parties, including the ruling party now, refused to accept RTI applications
May, 04, 2017

$ 770 bn black money entered India in 2005-2014: Report

  1. An estimated $ 770 billion in black money entered India during 2005-2014, US-based think tank Global Financial Integrity (GFI) has said in its latest report
  2. Nearly $ 165 billion in illicit money exited the country during the same period, the global financial watchdog
  3. Titled Illicit Financial Flows to and from Developing Countries: 2005-2014, the report is the first global study to place equal emphasis on illicit outflows and inflows
  4. The report said total illicit financial outflow was three per cent (about USD 165 billion) of India’s total trade of $ 5500.744 billion between 2005-2014
  5. Report suggested that Governments should establish public registries of verified beneficial ownership
    information on all legal entities to check black money
  6. All banks should know the true beneficial owner(s) of any account in their financial institution
Nov, 29, 2016

Tax defaulters get another chance

  1. What: The Centre introduced a Bill in the Lok Sabha that gives tax defaulters an opportunity to come clean by paying tax and penalties
  2. Key feature of the proposed amendment to the Income-Tax Act is a proposal to impose 50% tax on undeclared income that is voluntarily disclosed till Dec 30
  3. After that 82.5% (75% tax and 10% of such tax as penalty) could be levied on undeclared income detected by authorities
  4. The tax changes are intended to supplement the demonetisation move targeted at curbing black money
  5. The proceeds will be made a part of the Pradhan Mantri Garib Kalyan Yojana
  6. They will be used to fund schemes for providing irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood


This development indicates a sustained effort on the part of the govt against black money. Make notes of such developments, it helps to enrich mains answers. Also note the Pradhan Mantri Garib Kalyan Yojana.

Nov, 21, 2016

[op-ed snap] Challenges in the face of corruption

  1. Three components of black economy: Corruption
  2. Example, the high stamp duties on real estate transactions that lead to payments in cash
  3. Second- methods adopted for storing unaccounted wealth. Example, holding assets in gold
  4. Third, methods through which transactions are effected
  5. Bundles of rupees can be replaced by bundles of US dollars. By year end, Indian small businessmen will be as fluent with bitcoin as they are comfortable with US dollar bills
  6. Six battlegrounds in this war: gold, hawala, real estate, taxation, politics and elections, and administration
  7. In 2013, when the customs duty on gold was reintroduced, it dealt a body blow to the world of gold and jewellery conducted through white money
  8. Eliminate customs duty and solve this at the root cause. Customs duties are “bad taxes” and should go
  9. Hawala business that emerged in 1960s and 1970s in response to capital controls that were a part of Indian socialism, need to be tackled
  10. Buying agricultural land, obtaining urban infrastructure like electricity and water, and getting a building plan approved: all are mired in problems
  11. Cash payments are favoured so as to avoid stamp duty
  12. Real-estate sector should be merged into GST
  13. Taxes other than income tax and GST, at the central level, should be removed. This will take us to a high-compliance and low-corruption environment
  14. Running a political party and fighting elections requires large-scale resourcing forcing the use of black money
Nov, 19, 2016

Demonetisation: Distress messages go out from cooperative banks in rural India

  1. What: Operations at 370 district central cooperative banks (DCCBs) and over 93,000 primary agricultural credit societies (PACS) have been severely hit
  2. Why: The RBI slapping restrictions following the demonetisation of Rs 500 and Rs 1,000 notes
  3. Urban cooperative banks (UCBs) too have complained to the RBI that commercial banks are refusing to provide them currency support, affecting their operations
  4. DCCBs and PACS are considered the lifeline of the rural economy
  5. Especially for farmers in states like Maharashtra, Kerala, Uttar Pradesh, Gujarat, Tamil Nadu and Karnataka
  6. Reason: The curbs on them could be related to lax KYC (know your customer) norms and money laundering in some cooperative banks
Nov, 16, 2016

[op-ed snap] Artificially created recession II

  1. Impact: Supply chain of goods and services disrupted
  2. Traders and retailers deprived overnight of the funds to carry their business they can’t even pay for transport of goods to the market
  3. Retailers cannot sell goods since customers do not have money to buy them, they can provide goods on credit to customers only up to a point since they need to pay their suppliers
  4. In villages, kharif harvest is not yet fully marketed, but producers unable to sell their crops owing to shortage of the new money
  5. Many are being offered drastically lower prices for their produce
  6. Farmers who have already marketed their kharif crop cannot buy seed and fertilisers for sowing rabi
  7. Even in a relatively organised tea plantations sector, daily wages in new money have not been paid to workers, depriving them of their sustenance
Nov, 16, 2016

[op-ed snap] Artificially created recession I

  1. Prior steps that should have been taken: Prior large increase of lower denomination notes should have been ensured through banks and ATMs
  2. This would not reduce overall money supply and a normal level of activity could be maintained
  3. Condemning the step: Purchasing power of the population suddenly taken away, reducing the level of economic activity and causing distress to people
  4. Denomination of notes has nothing to do with the existence of black money, which is not held in hoards of notes but is a circulation of unrecorded and undeclared incomes
  5. Monetary authorities or government itself doesn’t believe that black money is connected to ‘high denomination’ Rs.500 and Rs.1,000 notes
  6. If they did, they would not have chosen to issue a new note of Rs.2,000 which is of even higher denomination
Nov, 15, 2016

Economists see ‘short-term pain, long-term gain’

  1. The govt’s demonetisation drive will likely negatively impact the economy in the short term
  2. But it could help over the longer term propel economic growth into double-digit levels
  3. Reason: As more of the informal economy becomes formal and the GST comes into effect
  4. Benefits: The NPAs of banks will go down as the cash coming in will lead to higher CASA (current account, savings account), in turn declogging the system
  5. Interest rates will come down because the money will go to the banks and to some extent some of it will go to the government as taxes
  6. The overall economic impact would include a likely appreciation of the rupee and a sharp slowing in inflation
  7. The banking system getting a boost and real estate prices falling about 20-25 per cent before stabilising
Nov, 12, 2016

Demonetisation could cut inflation, says Panagariya

  1. Source: NITI Aayog vice chairman Arvind Panagariya
  2. Views: The Centre’s demonetisation drive will help lower inflation
  3. Also as the black money goes out of the system, the money supply will shrink to some degree
  4. This will reduce the inflation rate in the absence of any open market operations by the RBI
  5. Savings that were kept in different forms particularly in the form of currency notes, they will now move into bank deposits. So we will see some surge in bank deposits
Nov, 10, 2016

[op-ed snap] Curbing the black currency menace

  1. Context: withdrawing highest-value currency notes of Rs.500 and Rs.1,000
  2. Justification: Stashing corrupt officials’ ill-gained cash under their mattresses, fuelling inflation as well as terrorism
  3. Introduction of new Rs.500 and Rs.2,000 notes: would check counterfeit currency and purge India’s economy of black wealth amassed in the form of high-value notes
  4. Problems: Step caused hardship as people struggle to get notes of smaller denomination for daily expenditure
  5. Administrative steps: ensure that no poor person is saddled with old, useless notes due to lack of official identity documents or a bank account
  6. Avoid putting to disadvantage older citizens unable to visit a bank repeatedly to exchange high-value notes
  7. Find ways to check black money parked in benami properties and gold
  8. There must be administrative and electoral reforms to advance digital payments
Nov, 10, 2016

‘Demonetisation to hit terror financing hard’

  1. What: The govt has said one of the reasons to demonetise currency notes of Rs. 500 and Rs. 1,000 was to curb the circulation of fake currency notes
  2. Why: Officials in the security establishment were upbeat that crimes like terror financing would be severely hit by the move
  3. Officials said that in 90% cases, the fake currency had been pumped in through the land route from Bangladesh
  4. Certain security features of Rs. 500 and Rs. 1,000 notes had been compromised
  5. The supplier of raw currency notes, the ink and the silver thread is same for India and Pakistan
Nov, 09, 2016

Move was in the pipeline for months

  1. The government’s move to scrap nearly 23.2 billion high-value currency notes of Rs. 500 and Rs. 1,000, was in the pipeline for several months but was kept tightly under wraps
  2. Statistics show that high denomination currency in circulation has risen sharply between 2011 and 2015
  3. While all currency notes grew 40%, Rs. 500 notes in circulation rose by 76% and Rs. 1000 notes went up by 109%
  4. But during this period, the economy expanded by 30% so the circulation of such notes had gone up disproportionately
Nov, 09, 2016

Rs. 500, Rs. 1000 currency notes no longer legal tender

  1. What: 500 and 1,000 rupee notes ceased to be legal tender from midnight on Tuesday
  2. Who: PM Narendra Modi announced this in a surprise address to the nation on Tuesday night
  3. Why: He said the decision was taken to root out the menace of black money and corruption
  4. Existing Rs. 500 or Rs. 1,000 notes can be deposited in an individual’s bank or post office accounts between November 10 and December 30
  5. The PM made a pointed reference to cross-border terror which was being funded by forged currency notes
  6. A government official said that the move was necessary to stop terrorists and drug cartels
Nov, 09, 2016

[op-ed snap] Making legal tender illegal-Good step but bad implementation

  1. Context: 500 and 1000 denomination notes no longer remain a legal tender
  2. Withdrawals from ATMs limited to Rs.2,000/day for next few days; returning bills to banks will require some form of government ID
  3. Step taken to deal with “the disease” of unaccounted income—or “black money”
  4. Across Asia, countries are moving away from high-denomination notes- Korea plans to go cashless by 2020- so as to curb the menace of black money
  5. Problems a common man would face: Tougher for small businesses and for poor
  6. ATM cards or mobile payments in India have not percolated far enough thus making transactions difficult for the poor
  7. Demonetization of this kind was necessary, but pushed too soon
  8. Hasty implementation: We first need private sector to create the cheap and easy mechanisms for cash transfers using smartphones before going cashless
Nov, 01, 2016

New ‘Benami’ law to come into effect from November 1

  1. Act: The Benami Transactions (Prohibition) Amendment Act will come into force on November 1, 2016
  2. It will be renamed as the Prohibition of Benami Property Transactions Act (PBPT Act)
  3. It defines benami transactions, prohibits them and further provides for punishment
  4. A transaction is named ‘benami’ if property is held by one person, but has been provided or paid for by another person
  5. It provides for the creation of an appellate mechanism called the Adjudicating Authority and Appellate Tribunal
Oct, 17, 2016

SIT moots independent ED probe into money laundering

  1. New recommendation: The Special Investigation Team (SIT) on black money has recommended that money laundering investigations by the Enforcement Directorate (ED) should be allowed without any dependence on registration of cases by other agencies.
  2. Background: The Prevention of Money Laundering Act (PMLA) at present provides that the ED can pursue only those cases which have been registered by agencies like the Central Bureau of Investigation (CBI), State police units and the Income-Tax Department.
  3. Previous recommendations: Based on the SIT’s recommendations, the Central government had earlier brought in some crucial amendments to the PMLA, apart from the Income-Tax Act and the Foreign Exchange Management Act.
  4. These were to strengthen the legal framework for effective action against those holding unaccounted income.
  5. A latest amendment to the PMLA empowers the ED to continue with the money laundering investigations even if the police case is closed in the court.
  6. The ED can still pursue the probe into a financial angle and file a separate charge sheet.
Oct, 04, 2016

[op-ed snap] Progress in black money amnesty scheme

  1. Theme: Record collections under the Government’s black money amnesty scheme.
  2. What worked this time: Tax department’s focus on demystifying and propagating the scheme.
  3. The tax department actively monitored high-value transactions that took place without PAN card details and sent letters to suspected evaders based on the information.
  4. Stern warnings from the Prime Minister himself about tough action and possible jail terms for tax evaders.
  5. Other steps being taken to uncover black money: Tax havens where Indian holdings have come to light are being actively pursued.
  6. The way ahead: The tax department must spruce up its data-mining methods to expand the country’s shallow tax base.
  7. The government needs to attack the root cause of the problem by making electoral funding transparent, curbing the misuse by the wealthy of tax-free income sops for farmers, and encouraging cashless transactions.
Oct, 04, 2016

Rs. 8,000 cr. under tax net, says Centre

  1. News: Govt told the Supreme Court that Rs. 8,186 crore kept in unreported foreign bank accounts has been brought under the tax net
  2. The feat was achieved despite restrictions like non-sharing of information by the Swiss authorities
  3. Context: Govt reply comes in towards a PIL petition seeking investigation against Indians holding offshore bank accounts and whose names feature in the Panama papers
  4. Govt has asked the apex court to dismiss the petition
  5. Why? It has already set up a multi-agency group probe involving the CBDT, RBI, Financial Intelligence Unit and ED to ensure speedy and coordinated investigation
Oct, 03, 2016

Rs. 65,250 cr. mopped up via new black money window

  1. What? Union Finance Ministery announced that the Central Board of Direct Taxes (CBDT) had received total disclosures of Rs. 65,250 crore under the Income Disclosure Scheme, 2016 in the form of cash and other assets
  2. The four-month window under the scheme for declaring undisclosed income or black money that had escaped assessment closed on 30th Sept midnight
  3. Earlier: The Voluntary Disclosure Scheme of 1997 had mopped up Rs. 9,760 crore in taxes at an average of about Rs. 7 lakh per declarant
  4. The VDS, unlike IDS, had not penalised the declarents and allowed them to value the assets declared at the market prices of 1987 rather than current rates
Aug, 25, 2016

Cabinet clears revised India-Cyprus DTAA

  1. DTAA: Double Taxation Avoidance Agreement
  2. Impact: Will give India the right to tax capital gains on investments routed through Cyprus prospectively from April 1, 2017
  3. Cyprus: Considered a haven for money laundering, round-tripping, and profit-shifting
  4. Context: Strengthening DTAAs- India recently revised DTAA with Mauritius & is in the process of revising its treaty with Singapore
Aug, 24, 2016

Govt examining proposal to ban cash transactions over Rs3 lakh

  1. It was recommended by the Supreme Court-appointed special investigation team (SIT) on black money, headed by M. B. Shah
  2. Impact: If implemented, it will help in curbing the generation of black money
  3. Provide push to India’s movement towards a cashless economy
Jul, 28, 2016

Lok Sabha passes benami transactions bill

  1. The bill provides for confiscation of benami properties, or assets held in the name of another person or under a fictitious name to avoid taxation
  2. This is the second initiative of the government to curb generation of black money
  3. First initiative: Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
  4. It was enacted to penalize those with unaccounted wealth abroad
Jul, 15, 2016

SIT wants to ban cash transactions above Rs 3 lakhs

  1. News: The Special Investigative Team (SIT) on undisclosed money wants a ban on any cash transaction over Rs 3 lakh and a limit of Rs 15 lakh on cash holdings
  2. In the wake of the ‘Panama Papers’ leak, it also recommended amending the law to provide for confiscation by the state of such money abroad
  3. The SIT, in its fifth report to the Supreme Court, said that a large amount of unaccounted wealth is stored and used in the form of cash
Jul, 15, 2016

Income Declaration Scheme extended

  1. News: The Centre announced an extension of a deadline under the Income Declaration Scheme to September 30, 2017 from November 30, 2016
  2. The Scheme is aimed at bringing undeclared income and assets into the tax net
  3. Staggered due dates for the payments – minimum 25% tax, surcharge and penalty is to be paid by November 30, 2016, another 25% by March 31, 2017, and the remaining amount by September 30, 2017
  4. The previous deadline for the entire payment of the tax, interest, and penalty was November 30, 2016
Jun, 29, 2016

Government tries to calm fears of black money holders

  1. Govt has sought to assure that it would not harass those who came forward with their undeclared income
  2. The compliance window is open for people with undisclosed income to legitimise it by paying 45% tax, between June 1 and September 30
  3. Any declaration made under the Income Declaration Scheme 2016 would be protected, and that information would not be shared
Jun, 02, 2016

Only ill-gotten assets a crime, observes SC judge

  1. Context: SC hearing the wealth case involving Tamil Nadu Chief Minister Jayalalithaa
  2. SC: Acquisition of assets per se is not a crime unless proved that the source of funds is illegal
  3. The court asked how Karnataka could prove that the money circulated among the co-accused was that of Ms. Jayalalithaa
  4. Ms. Jayalalithaa had argued that the prosecution cannot presume that she was the source of the money flow merely because the co-accused lived in the same house as her
May, 21, 2016

‘No immunity for those who earned money through graft’

  1. Context: Finance Ministry’s FAQ on Income Declaration Scheme
  2. No immunity: Persons who have earned money through corrupt practices cannot take advantage of the domestic black money disclosure scheme
  3. Scheme: The four-month window which opens on June 1 provides an opportunity to people having undisclosed income to come clean by paying tax, penalty and surcharge totalling 45% of fair market value
  4. Confidential: The declarations made will remain confidential as in the case of return of income filed by an assessee
Apr, 05, 2016

Centre orders probe against Indians linked to tax havens

  1. Context: The expose by a German newspaper and a global team of investigative journalists about investments going into tax havens
  2. News: Union govt ordered the formation of a special agency to investigate Indians who figure in the ‘Panama papers’
  3. Panama Papers: A set of over 11 million leaked documents that reveal how the rich and the connected around the world used tax havens for salting away their wealth
Mar, 07, 2016

Those under watch ineligible for IDS

  1. Context: The govt’s decision to open a one-time compliance window for domestic black money-holders
  2. News: It would exclude potential disclosures from people who received notices seeking a regular explanation on the returns they had filed
  3. The scheme allows undisclosed income of any financial year up to 2015-16 through this window
  4. Impact: This could limit the success of the scheme
Mar, 01, 2016

A chance for tax evaders to come clean

  1. Context: The govt’s commitment to remove black money from the economy
  2. News: The govt has decided to open a one-time, 4-month compliance window for domestic black money-holders
  3. It is intended to help them come clean by paying tax and penalty of 45%
  4. Benefits: There will be no scrutiny of money declared, either under the Income-Tax Act or the Wealth Tax Act
  5. The declarants will have immunity from prosecution
  6. The IT dept. has improved its capability to detect evasion with increased access to information and the availability of technology-driven analytical tools to process such information
Feb, 16, 2016

SIT verifying outflow of illicit funds

  1. The News: SIT has asked the Directorate of Revenue Intelligence to verify claims made by Global Financial Report
  2. Background: Global Financial Report asserted that illicit financial flows worth $505 billion left India between 2004 and 2013
  3. Challenge: It is impossible to accurately ascertain how much money has gone
  4. Any estimate of the quantum of illicit money incorporates a number of assumptions
  5. Future: The Indian govt has entered into several bilateral agreements with other countries to share tax information, which will help in curbing the outflow of illicit funds
Feb, 13, 2016

In 5 years, black money detection up 15.5 times

Undisclosed income detected during each survey has shot up drastically in two years

  1. Context: The nationwide crackdown on black money has meant a steady increase in detection of undisclosed income, which has jumped 15.5 times
  2. Background: Director General of Income Tax report shows business houses, including diamond traders, steel magnates and pharma companies coming under taxmen’s scanner
  3. Action: Taken through direct enquiry regarding investment and expenditure under Section 131, 133A and 132 of IT Act
  4. The News: More and more companies are involved in making bogus entries in their accounts
  5. Findings: Under this jamakharchi or ‘accommodation entry business’, paper entries are made in account books to facilitate cash movement
Jan, 07, 2016

Black money amnesty scheme nets Rs. 4,164 cr.

The Union govt. has received 644 declarations for black money worth Rs. 4,164 crore.

  1. The declarations were made under one-time, come-clean compliance window provided to evaders.
  2. It was provided by Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
  3. The govt. has also earned Rs 2,428.4 crore by way tax and penalty on the declared sums.
Dec, 11, 2015

India fourth-largest source of black money: Report

India has been ranked the fourth-biggest source of black money, with $510 billion worth of illicit financial flows during 2004-2013, or $51 billion annually, on average.

  1. This was stated in a report which was released recently by Global Financial Integrity (GFI), a research and advisory group based in Washington.
  2. According to the report, $1.1 trillion flowed out of developing and emerging economies illicitly in 2013 alone.
  3. The capital outflow mainly stemmed from tax evasion, crime, corruption and other illegal activities.
  4. China tops the list for 2004-2013, with $139 billion average illicit financial flow per annum, followed by Russia and Mexico.
Dec, 04, 2015

Hiding foreign assets to be a ‘very risky affair,’ Sinha

Indian govt will start receiving information of overseas assets from other nations and failure to disclose them will become a very risky affair from 2017.

  1. Cooperation among countries and sharing of information is the key to unearthing illicit money stashed in safe havens.
  2. Strict bank secrecy has ended, and a new environment of transparency is now operational.
  3. India is an early adopter of Common Reporting Standard and committed to adopting it by 2017.
Nov, 03, 2015

India yet to utilise info on black money

  1. HSBC whistle-blower said he is willing to cooperate with the investigative agencies in their black money probe but would need protection.
  2. He claimed that lot of information on illicit funds is lying unused by the Indian authorities.
  3. He also claimed that millions of crores worth illicit funds are flowing out of India.
Oct, 30, 2015

Meet to devise new strategy to combat money laundering

  1. International groups combating money laundering rackets funding terror activities and organised crime syndicates will come together.
  2. They will meet in Delhi for brainstorming to build greater inter-regional coordination in law enforcement and intelligence-sharing.
  3. It will address a wide range of issues pertaining to trans-border illicit financial transactions by organised criminal syndicates and terror outfits.
  4. It will make recommendations to strengthen the South Asia Regional Information and Coordination Center for more concerted action in the region.
Oct, 05, 2015

Payments banks to help in move to ‘cashless economy’

  1. The opening of a large number of payment gateways, Internet banking, payment banks will prompt the use of banking transactions and plastic money to rise significantly.
  2. The govt. was considering making it mandatory to provide PAN card details for cash transactions beyond a certain limit.
  3. The monitoring regime of the income tax department has been strengthened.
  4. The department can detect large cash withdrawals, or large cash transactions which enter the system.
  5. The Finance Minister lays the blame for incidence of tax evasion on previous govts and their high tax rates.
Oct, 02, 2015

Black money totalling Rs. 3,770 cr. declared

  1. The govt.’s declaration window under the new Black Money Act, saw all of 638 declarations worth Rs.3,770 crore.
  2. This amount is Rs 2,800 crore less than what PM had declared that he would recover, during his Independence day speech.
Jul, 21, 2015

Centre yet to notify crucial FEMA amendments

  1. The Union government has not yet notified the amendments to the Foreign Exchange Management Act (FEMA).
  2. These ammendments were incorporated into the legislation after President Pranab Mukherjee’s assent in May 2015.
  3. The delay may have implications for the pending cases of foreign exchange violations, including those allegedly involving the former IPL chief, Lalit Modi.
  4. What do we mean by notifications? Wasn’t the bill already passed by the president!
Jun, 04, 2015

India & Automatic Exchange of Financial Account Information

  1. India has joined the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information (AEOI).
  2. Necessary legislative changes will be made in section 285BA of the Income Tax Act, 1961.
  3. These standards will enable India to receive information from almost every country in the world including offshore financial centres.
  4. It will directly help the Government to curb tax evasion and deal with the menace of black money stashed abroad.
Apr, 20, 2015

Automatic info exchange only way to tackle black money

  1. Common Reporting Standards on Automatic Exchange of Information should be implemented on a fully reciprocal global basis.
  2. This can help tackle the problem of the problem of black money & illicit flow to offshore jurisdictions and tax havens.
  3. Base erosion and profit shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ‘disappear’ for tax purposes!
  4. India welcomes the progress made in BEPS project incorporating the participation of 8 non-Oecd G20 countries
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