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Q. Need to extend IDS: Can extension of Income Disclosure Scheme will helps in curbing black money in the current situation? Discuss.
Nov 18, 2016 Related to : GS Paper-3

Ans :

Introduction-

Central government has demonetised the high value currency notes of Rs. 1000 and Rs.500 recently asked people to deposit such currency notes in their bank accounts. The objective is to curb the black money that exists in our economy and other aspects like curbing corruption and terror financing. Exchanging money through bank account will help in collecting data of all deposits above Rs 2.5 lakh, screen the data and identity those with income that cannot be accounted for.

Issues-

  • Those who deposits more than Rs. 2.5 lakh comes under the scanner of income tax and they needs to pay the taxes for amount which exceeds 2.5 lakh.
  • The people who evaded tax and even not missed income disclosure scheme (IDS) might need to pay penal charges higher than that of IDS rate. 
  • But to charge more taxes, government need to pass law to give retrospective changes. Hence many argues that to avoid retrospective tax, it is better to extent IDS for some time to realise the goals of demonetisation. 

How extending IDS will help?

  • Extending IDS till December end would let those who are working assorted stratagems to convert their black money held in demonetised notes into the new currency notes, gold or, dollars, paying a premium for the purpose.
  • It gives people with unaccounted money a chance to come clean, pay tax and hold only fully accounted for wealth. 
  • It will reduce the amount of black money, as compared to a situation in which people convert their existing hoard into a new one fully compatible with the new currency regime. 
  • Similarly, the premium that facilitators of such conversion collect, to add to the country’s black money, would go to the government’s coffers, as part of the tax, surcharge and penalty of 45% they would pay on disclosures under IDS.
  • Extending IDC will give people one more opportunity, as government is very serious on its war against black money, hence people needs to come clean.

Conclusion-

The intent of the government to unearth the black money is very clear and it has initiated various measures in this regard. Though the recent demonetisation is one of the boldest step in unearthing black money, but it caused some panic among people. Hence to address such issues, it is better to extent IDC and give one more opportunity to black money holders without changing tax laws retrospectively.

 


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