Lok Sabha Question No. 1075 (UNSTARRED), answered on 2021-02-08
Subject: Black Money
Ministry: FINANCE
Asked by: Malook Nagar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA

## UNSTARRED QUESTION NO. †1075 TO BE ANSWERED ON MONDAY, 08 th  FEBRUARY, 2021

MAGHA 19, 1942(SAKA)

## BLACK MONEY

## †1075:  SHRI MALOOK NAGAR :

## Will the Minister of FINANCE be pleased to state:

- (a) the reasons for the failure to bring back black money from abroad and the details of initiatives taken in this direction so far;
- (b)  whether the Government is considering to disburse certain sum of money in the JanDhan Yojana accounts to eradicate poverty in the country and if so, the details thereof;
- (c)  the efforts made by the Government to strengthen the falling economy and reduce the rising prices; and
- (d) the details of benefits or the loss suffered by the economy due to demonetisation?

## ANSWER MINISTER OF STATE FOR FINANCE (SHRI ANURAG SINGH THAKUR)

- (a):      The  Government has taken various initiatives in the recent  years to bring back black money from abroad. These, inter-alia, include the following:
- (i) Enactment  of  'The  Black  Money  (Undisclosed  Foreign  Income  and  Assets)  and Imposition  of  Tax  Act,  2015'  which  has  come  into  force  w.e.f.  01.07.2015  to specifically  and  more  effectively  deal  with  the  issue  of  black  money  stashed  away abroad.
- (ii) Constitution of the Special Investigation Team  (SIT) on Black Money  under Chairmanship and Vice-Chairmanship of two former Judges of Hon'ble Supreme Court,
- (iii) The  Government  of  India  has  entered  into  Double  Taxation  Avoidance  Agreements /Tax Information Exchange Agreements /Multilateral Convention on Mutual Administrative Assistance in Tax Matters/SAARC  Multilateral Agreement  ('tax treaties')  with  other  countries  which  provide  for  exchange  of  information,  which  is foreseeably  relevant  for  administration  and  enforcement  of  domestic  laws  concerning taxes. India has been proactively engaging with foreign governments, for exchange of information under these tax treaties.
- (iv) Wherever required, the tax treaties/ agreements have been comprehensively amended to enable procuring the requisite information from the relevant foreign jurisdiction.
- (v)  India has also implemented Automatic Exchange of Information based on the Common Reporting Standard (CRS)  and  receives, from  2017  onwards,  financial account information of Indian residents in other countries.
- (vi)  India has also entered into an Inter-Governmental Agreement (IGA) with USA in 2015 for sharing of financial account information on automatic basis.

(vii)  The  Fugitive  Economic  Offenders  Act,  2018  has  been  enacted  which,  inter-alia, provides for expeditious confiscation of proceeds of crime and properties owned by a fugitive economic offender in India or abroad with a view to make him submit to the jurisdiction of Courts in India.

As  an  outcome  of  such  initiatives,  significant  results  in  this  regard  have  been  achieved, which, inter-alia, include the following:

- (i) As  on  31.12.2020,  notices  have  been  issued  in  475  cases  under  the  Black  Money (Undisclosed  Foreign  Income  and  Assets)  and  Imposition  of  Tax  Act,  2015,  involving undisclosed foreign assets and income of over Rs. 14,300 crores.
- (ii) On  account  of  deposits  made  in  unreported  foreign  bank  accounts  in  HSBC  cases, undisclosed income of more than Rs. 8460 crores have been brought to tax and penalty of more than Rs. 1290 crores levied, so far.
- (iii)Sustained investigations conducted in the cases revealed by International Consortium of Investigative  Journalists  (ICIJ)  have  led  to  detection  of  more  than  Rs.  11,010  crore  of credits in the undisclosed foreign accounts, so far.
- (iv) In the Panama Paper Leaks investigations, undisclosed foreign investments amounting to over Rs. 1700 crores have been detected, so far.
- (b) In  view  of  the  situation  of  economic  and  social  distress  which  has  arisen  due  to outbreak of Novel Corona virus-COVID-19, the Government announced a relief package on 26 th March 2020, under Pradhan Mantri Garib Kalyan Yojana (PMGKY), which, inter-alia, included one time ex-gratia payment of Rs 500 per month for three months (April, May and June 2020) to women Pradhan Mantri Jan dhan Yojana (PMJDY) account holders. Following the  announcement,  the  Ministry  of  Rural  Development  has  released  the  funds  to  the  bank accounts  of  the  eligible  beneficiaries  though  various  banks.  As  per  the  Utilization  reports submitted by various bank, an amount of Rs 30,945 crore approximately was credited to the bank accounts of 20.64 crore women PMJDY account holders.

(c):  Government has implemented several major reforms in recent years to boost investment and GDP growth.

The  Government  enacted  the  Insolvency  and  Bankruptcy  Code  (IBC)  and  recapitalized banks.  The  other  measures  taken,  inter-alia,  include  Goods  and  Services  Tax  (GST)  to simplify the indirect tax regime, Make-in-India programme to boost domestic manufacturing capacity,  liberalization  of  Foreign  Direct  Investment  (FDI)  and  Jan  Dhan-Aadhaar-Mobile (JAM) Trinity towards greater transparency, efficiency and financial inclusion.

In  September,  2019  the  corporate  tax  rate  was  reduced  to  15  per  cent  for  new  domestic manufacturing companies, which is amongst the lowest in the world. In December 2019, the government announced the Rs.103 lakh crore National Infrastructure Pipeline which would significantly boost infrastructure and spur growth impulses in the economy.

The Union Budget 2020-21 also announced a number of growth supporting measures which, inter-alia,  include,  a  16-point  action  plan  for  holistic  development  of  the  agriculture  sector and critical measures to boost infrastructure and rural spending.

In  FY  2020-21,  Government  announced  a  special  economic  and  comprehensive  package under AatmaNirbhar Bharat, including measures taken by RBI, amounting to about Rs. 27.1 lakh crores - equivalent to 13 per cent of India's GDP- to combat the impact of the COVID19 pandemic and to revive economic growth. The package included, among others, in-kind and  cash  transfer  relief  measures  for  households, employment  provision  measures  under Pradhan Mantri Garib Kalyan Rojgar Abhiyaan and increased allocation under MGNREGS, credit  guarantee  and  equity  infusion-based  relief  measures  for  MSMEs  and  NBFCs  and regulatory and compliance measures.

Structural reforms were also announced as part of the AatmaNirbhar Bharat Package which, inter alia, included deregulation of the agricultural sector, change in definition of MSMEs, new PSU policy, commercialization of coal mining, higher FDI limits in defence and space sector, development of Industrial Land/ Land Bank and Industrial Information System, revamp of Viability Gap Funding scheme for social infrastructure, new power tariff policy and incentivizing States to undertake sector reforms. The implementation of the package is reviewed and monitored regularly.

Government monitors the price situation regularly and has taken various measures from time to time to stabilize prices of food items which, inter-alia include appropriately utilizing trade and  fiscal  policy  instruments  like  import  duty,  Minimum  Export  Price,  export  restrictions, etc.  to  regulate  domestic  availability  and  moderate  prices;  imposition  of  stock  limits  and advising States for effective action against hoarders and black marketers; and, provision of higher Minimum Support Prices to incentivize farmers for increasing production.

Government has taken several steps to improve the availability of pulses, onion and potato and make them available to consumers at affordable prices. These include:

- i. Banning  the  export  of  onion  with effect  from  14.09.2020,  revoked  w.e.f. 1.01.2021.
- ii. Imposition  of  stock  limit  on  onion  under  the  Essential  Commodities  Act  w.e.f. 23.10.2020 to prevent hoarding.
- iii. Easing  of  restrictions  on  imports,  facilitating  imports  at  integrated  check-posts, issuance of licenses for imports and reduction in import duties.
- iv. Government also implements Price Stabilization Fund (PSF) to help moderate the volatility in prices of agri-horticultural commodities like pulses, onion, and potato.
- v. Government of India has entered into a Memorandum of Understanding (MoU) with  Mozambique to  ensure  assured  supply  of  pulses  (Tur  and  other  pulses)  in India. The MoU envisages imports of 2 LMT pulses during 2020-21.

(d): The Government of India decided to cancel the legal tender status of Rs. 1000 and Rs. 500 denomination currency  notes on November 8, 2016  with several objectives including, inter alia , giving a big boost to digitalization of payments to make India a less cash economy, eliminating  black  money,  and  curbing  the  use  of  fake  currency  in  financing  subversive activities like terrorism.

As  per  weekly  statistical  supplement  of  RBI,  the  Notes  in  Circulation  (NIC)  were  Rs. 17,741.87 billion as on November 04, 2016 and Rs. 27,712.43 billion as on January 08, 2021, thereby  recording  an  increase  of  56.2%.  NIC  had  grown  by  29%  from  October  2014  to October 2016. At this rate, NIC would have increased to Rs. 28,524.58 billion as on January 08,  2021.  As  actual  NIC  on  January  08,  2021  are  only  Rs.  27,712.43  billion.  The demonetisation, followed by digitalization and reduction of cash use in informal economy, has succeeded in reducing NIC by as much as Rs. 812.15 billion.

This is also supported by the steady increase in the digital payments transactions since last few years post demonetisation. The total transaction volume increased from 2071 crore in FY 2017-18 to Rs. 3134 crore for the year FY 2018-19, which corresponds to a growth rate of 51%. During 2019-20, the number of card payment transactions carried out through credit cards  and  debit  cards  increased  by  23.5  per  cent  and  16.1  per  cent  respectively,  while  the value increased by 21.1 per cent and 35.6 per cent to Rs. 7.3 lakh crore and Rs. 8.0 lakh crore respectively. Prepaid Payment Instruments (PPIs) recorded a volume growth of 15.7 per cent on top of the 33.2 per cent a year ago, while transactions value at Rs. 2.2 lakh crore increased by little more than 1.0 per cent.

As reported by RBI, 762,072 pieces of counterfeit bank notes were detected in the Banking system during 2016-17, 522,783 pieces in 2017-18 and 317,389 pieces in 2018-19. Hence, demonetisation resulted in curbing of the counterfeit currency.

Demonetisation of bank notes of Rs. 500 and Rs. 1000 denomination resulted in significant positive impact on most theatres of violence in the country. It led to instant extinguishment of high denomination fake Indian currency notes.

Impact  of  Demonetisation  on  Revenue  Collection:  Net  direct  tax  collections  for  2017-18 amounted to Rs. 10.03 lakh crore, which is 18% higher than the collections for 2016-17. The collections for 2016-17 were also 14.6% higher than the collections for 2015-16. On the other hand, the growth rates in 2015-16 and 2014-15 were only 6.6% and 9.0%, respectively. The robust growth in direct tax revenue in the year of demonetisation and the year after that is indicative  of  a  positive  impact  of  demonetisation  on  the  level  of  tax  compliance  in  the country. The growth rate of 18% for 2017-18 was the highest in preceding seven financial years. There was also exceptional growth in the revenue flow from Advance Tax and SelfAssessment Tax under Personal Income Tax (PIT), corroborating the premise that demonetisation and the subsequent use of bank deposit data by the Income Tax Department had a major impact on voluntary tax payments by the non-corporate/ individual taxpayers.

Impact of demonetisation on Tax Base : During FY 2017-18, 6.86 crore Income Tax Returns (ITRs)  were  filed  with  the  Income  Tax  Department  as  compared  to  5.48  crore  ITRs  filed during  FY  2016-17,  showing  a  growth  of  25%.  This  growth  rate  is  the  best  growth  rate achieved in last five years. The spurt in I-T returns is a definite indicator of raised compliance level  in  the  wake  of  demonetisation.  Further,  during  FY  2017-18,  the  number  of  new  ITR filers  also increased to 1.07 crore as compared to 85.51 lakh new ITR filers added during FY 2016-17, which translates into a growth of 25%. In earlier years, the new filers were between 50 lakh and 66 lakh. There is, therefore, a clear upswing in the new tax filers after 2015-16, which can be attributed to higher level of compliance due to transfer of cash into the formal channels as a result of demonetisation.

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