Lok Sabha Question No. 3101 (UNSTARRED), answered on 2023-03-20
Subject: Offshore Profit Shifting
Ministry: FINANCE
Asked by: M.K. Vishnu Prasad, T.R.V.S. Ramesh

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO. 3101

ANSWERED ON 20/03/2023

## OFFSHORE PROFIT SHIFTING

3101: DR. VISHNU PRASAD M.K.: SHRI T.R.V.S. RAMESH:

Will the Minister of FINANCE be pleased to state:

- (a)  the  total  number  of  Indian  citizens  and  corporates  having  bank  accounts  outside  the country during each of last three years;
- (b)  the  total  amount  of  money  saved  in  such  accounts  by  Indian  citizens  and  corporates during the same period;
- (c)  whether  Government  has  taken  note  of  the  phenomenon  of  offshore  profit  shifting  by corporates operating in India and if so, the details thereof and the reaction of the Government thereto;
- (d)  the  estimated  extent  of  revenue  loss  to  Government  due  to  offshore  profit  shifting  by corporates;
- (e) the steps undertaken by the Government to curb the practice of offshore profit shifting; and
- (f) the amount of black money detected and recovered during each of the last eight years?

## ANSWER

## MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a):  Residence  in  India  as  per  the  Income-tax  Act,  1961  is  different  from  Citizenship  in respect of individuals. An individual, who is not a citizen of India, may also be a tax resident of India as per the relevant provisions of the Income-tax Act, 1961. A citizen of India may also not  be  considered  as  a  tax  resident  of  India  as  per  the  relevant  provisions.  Further,  a company is said to be a resident in India if it is an Indian company or its place of effective management,  in  that  year,  is  in  India.  In  view  of  this,  data  is  not  available  separately  in respect of bank accounts held outside India by Indian citizens and corporates.

(b): No such data is available separately in view of (a) above.

(c):  Offshore  Profit  Shifting  (usually  referred  internationally  as  Base  Erosion  and  Profit Shifting [BEPS]) refers to strategies adopted by Multinational Enterprises to exploit gaps and mismatches in international tax rules to shift profits from the jurisdiction where the economic activities giving rise to such profits are performed, to outside jurisdictions. Concerned about such  BEPS  risks  for  all  countries,  the  Organisation  for  Economic  Co-operation  and Development (OECD)/G20  countries launched the BEPS  project for addressing tax avoidance by Multinational Enterprises. India has actively participated in the BEPS project.

(d): There is no official estimate of the extent of revenue loss due to offshore profit shifting.

(e):  Various  measures  have  been  undertaken  by  the  Government  to  combat  BEPS  risks, which are, inter alia, as under:

- (i) India  has  signed  and  ratified  the  Multilateral  Convention  to  Implement  Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("Multilateral Instrument" or "MLI").
- (ii) Finance Act, 2017 introduced Section 94B of the Income-tax Act, 1961 which provides for limitation on deductibility of interest.
- (iii) Amendment to Section 90 of Income-tax Act, 1961 to incorporate the language of  the  preamble  to  the  MLI,  which  is  an  express  statement  to  prevent  non taxation or reduced taxation through tax evasion or avoidance.
- (iv) Amendment  to  Section  9  of  the  Income-tax  Act,  1961  in  respect  of  taxable nexus through 'Significant Economic Presence'.
- (v) Amendment  to  Section  9  of  the  Income-tax  Act,  1961  to  prevent  artificial avoidance of business connection in line with BEPS Action 7 recommendations.
- (vi) Under  BEPS  Action  13,  all  large  multinational  enterprises  are  required  to prepare a Country-by-Country (CbC) report. This CbC report is shared with tax administrations of relevant jurisdictions, for appropriate use. India has entered into a Multilateral Competent Authority Agreement (MCAA) with other relevant countries for exchange of Country-by-Country reports and regularly exchanges such reports with other signatories.

- (vii) Robust  and  detailed  Transfer  pricing  rules  provide  for  transactions  to  be evaluated on Arm's length principles.

(f): Whenever any instance of unaccounted/black money comes to its notice, the Income Tax Department takes appropriate  actions  as  per  the  provisions  of  the  Income-  tax  Act,  1961. Such actions include conducting searches and surveys, assessment of income, levy of tax, imposition of penalty, launching of prosecution, etc.

The  details  of  search  &  seizure  actions  conducted  by  the  Income  Tax  Department during last eight years are as under:

| Financial Year   |   Number of groups searched |   Total assets seized [in Rs. Crore] |
|------------------|-----------------------------|--------------------------------------|
| 2014-15          |                         545 |                               761.7  |
| 2015-16          |                         447 |                               712.32 |
| 2016-17          |                        1152 |                              1469.42 |
| 2017-18          |                         582 |                               992.52 |
| 2018-19          |                         966 |                              1567.07 |
| 2019-20          |                         984 |                              1289.47 |
| 2020-21          |                         569 |                               880.83 |
| 2021-22          |                         686 |                              1159.59 |

Further,  the  Government  enacted  a  comprehensive  and  a  more  stringent  new  law, namely, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 that has come into force w.e.f. 01.07.2015. Apart from prescribing more stringent penal consequences, this law has included the offence of willful attempt to evade tax etc. in relation to undisclosed foreign income/assets as a Scheduled Offence under the Prevention of Money-laundering Act, 2002 (PMLA).

648  disclosures  involving  undisclosed  foreign  assets  worth  Rs.  4164  crores  were made in  the  one-time  three  months  compliance  window,  which  closed  on  30 th September 2015, under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The amount collected by way of tax and penalty in such cases was about Rs. 2476 crore.

The year-wise details of assessments completed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 are as under:

| Financial Year   |   Number of assessment orders passed |   Demand raised [In Rs. Crore] |
|------------------|--------------------------------------|--------------------------------|
| 2018-19          |                                   16 |                            135 |
| 2019-20          |                                   30 |                           1026 |
| 2020-21          |                                  120 |                           7055 |
| 2021-22          |                                  183 |                           5350 |

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