Government's New Plan to Acquire Black Money
The High Level Advisory Group (HLAG) set up by the Minister of Commerce has recommended Elephant Bond, an amnesty scheme to bring black money back in India.
Under this proposed scheme, unaccounted wealth holders can disclose their assets by paying minimum tax.
Under the scheme, they have to invest 40 per cent of such wealth in long-term infrastructure bonds called as Elephant Bonds. The proceeds from issuance of such bonds will be utilized for development of Infrastructure in India. The HLAG was asked to give recommendations on ways to promote the country's trade, investments.
A person who invests his black money in an Elephant Bonds will have to pay 15 per cent of unaccounted wealth as tax. The 40 per cent of wealth so declared will have to be invested in long term bonds.
The coupon rate of interest on such bonds will be linked to LIBOR (LIBOR plus 500 basis points) and the coupon rate would be 5 per cent. Interest earned on elephant bond shall be chargeable to tax at the higher rate of 75 per cent.
The maturity period of these bonds would be around 20 to 30 years. The scheme will be open for anyone who wants to disclose the unaccounted wealth and to get immunity from penalty and prosecution under various laws can opt for this amnesty scheme.
The High Level Advisory Group (HLAG) has recommended that a subscriber to an Elephant Bond would get immunity from penalty and prosecution under all laws including foreign exchange, black money laws and taxation laws.
'Elephant Bonds' are different from earlier schemes as it gives immunity from all laws on disclosing of unaccounted wealth and on the other side, the Government would get the enough amount in form of tax and investment in bonds to channelize funds of infrastructure development in India.
This will be, if it gets the government nod, not the first time that an amnesty scheme has been proposed to bring the black money back in India.
In 2016, Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS) was introduced under which a person could declare his undisclosed cash by paying tax, surcharge and penalty. However, that scheme did not turn out to be attractive owing to exorbitant tax rate and non-immunity from certain criminal legislations such as Prevention of Money-Laundering Act, 2002, Prevention of Corruption Act, 1988.
Similarly in 1981, the Special Bearer Bonds (Immunities and Exemptions) Act, 1981 was brought in to channelize the black money for effective economic and social planning. This scheme also had certain shortcomings such as bond holders were not entitled to avail any setoff in any tax proceedings on the ground that he has subscribed to the bonds which in effect didn't isolate the bonds from the regular tax proceedings.