The NDA government in June 2001 had reduced the limit to six years if the income escaping assessment exceeded Rs.1 lakh and four years in other cases. The ministry now wants to again increase the limit to 10 years, particularly in relation to foreign transactions.
In a significant step to bring back black money stashed by Indians in tax havens abroad, the coming Budget is likely to announce a measure to empower assessment officers to reopen tax evasion cases as old as 10 years, from the current limit of six years.
Cases related to international transactions by individuals would particularly come under focus. The likely Budget proposal will allow the tax authorities to make use of information provided by various countries or other sources about money parked by Indians in low-tax jurisdictions.
Currently, even if the tax authorities get information about secret foreign bank accounts of a person, they are bound by law to open the accounts only for the past six years. “Sometimes, we get past information from other sources, but we cannot investigate cases beyond six years. Many people have shifted their secret accounts in the last few years. So, there is need to get past information to nab the evaders,” said a finance ministry official.
The government has been revising its treaties with many tax havens to crack down on evaders but many such revised agreements, including the one with Switzerland, will allow India to access information only with prospective effect. However, at times the government gets past information from a third party. An example is data shared by Germany on accounts of Indians in LGT Bank of Liechtenstein. The tax agreement with Singapore allows sharing of information for the past three years.
Double Taxation Avoidance Agreements (DTAAs) with some jurisdictions allow the exchange of past information in criminal tax matters. India has been pushing these countries for the sharing of all past information. Earlier, the time limit for reopening assessment cases was 10 years, seven years and four years for quantums of evasion being over Rs.1 lakh, Rs.50,000 or nil, respectively.
It considered the option of increasing the limit to 16 years or completely removing it, but, the official said, that could draw flak from taxpayers.
The ministry can seek information from taxpayers on unexplained investment under Section 69 of the Income Tax Act. It can seek details on unexplained expenditure under Section 69C of the Act. As DTAAs with many countries don’t allow name-fishing enquires, investigation of past records can help the authorities approach tax havens with more relevant details of persons suspected of tax evasion.
Last month, Central Bureau of Investigation director A P Singh had said an estimated $500 billion of illegal money was deposited by Indians in tax havens abroad. He said Indians were the largest depositors in Swiss banks.
However, the Swiss government later issued a press release saying, "There has been speculation about the amount of wealth held by Indians in Swiss banks. Such estimates and statistics lack evidence and are uncorroborated.”
The interim recommendations of a Bharatiya Janata Party task force in 2009 had estimated the amount of black money stashed abroad at $500 billion to $1.4 trillion