The Special Investigation Team (SIT) on black money has recommended banning cash transactions of ₹3 lakh and above and restricting cash holding with individuals and industry to ₹15 lakh to curb illegal wealth in the country.
Headed by Justice MB Shah, the committee submitted its fifth report to the Supreme Court on methods to curb black money in the economy, and made these two recommendations which the government will now review as it tries to eliminate thousands of crores of black or undeclared money.
The committee was appointed after Prime Minister Narendra Modi took office and reports to the Supreme Court. The report while explaining the need for a 3-lakh cap on cash transactions said, “Having considered the provisions which exist in this regard in various countries and also having considered various reports and observations of courts regarding cash transactions, the SIT felt that there is a need to put an upper limit to cash transactions.”
Among the other recommendations of the company, a four-month compliance window has been offered that ends in September and gives the citizens an opportunity to reveal undisclosed income from any sort of asset and escape criminal action. The disclosures are taxed at 45% of their value. In the upcoming monsoon session beginning on Monday, the government will ask law-makers to approve changes to a 1988 law that defines “benami”or proxy-owned assets with a provision of seven years of jail and hefty fine in case of being found guilty.
Earlier in May, the market regulator SEBI had strengthened the rules for P-notes to improve transparency and check money laundering through stocks. Participatory (“P”) Notes allow foreign investors to buy Indian stocks, whereas the new norms now imposed will require mandatory registration with SEBI of these Offshore Derivative Instruments used by foreign investors to invest in the domestic stock market, and the beneficiaries have to be identified and verified to help detect illegal money flowing into the country.
The government has also said it will start imposing capital gains tax on investments coming from Mauritius starting next year in an attempt to stop “round tripping” or the return to India of wealth that has not been accounted for by routing it through countries that provide easy channeling of funds without too many questions.