International Finance International Finance
Black money can now be converted to white money through legitimization by paying 15% tax and it can be deposited in any account with a bank in India. No questions will be raised by anyone even by the officials at the enforcement directorate as it will be an authorized transfer of funds from an overseas firm to a company in India through official banking channels. However, it will be a bit expensive as it will involve lawyers and accountants who need to be hired to make the money transfer look genuine.
This can be done in the following ways:
Step 1: An Indian firm controlled by the Swiss bank account holder should set up a company in Dubai as a subsidiary since it will be easier to set up compared to that in India. This company will serve a single purpose which is to hold the money coming out of Switzerland to Dubai, before it travels to India.
Step 2: The money lying with the Swiss bank will be transferred to a Dubai Bank, where the newly set-up company has an account.
Step 3: The Indian parent company will receive the money as dividend income from its subsidiary in Dubai and it has to pay only 15% of the money after it comes to India. This tax rate is 2-3 % lower than Singapore's, and half of what firms and individuals pay in India.
Apart from this, recently, the Indian Government has entered into Double Taxation Avoidance Agreements and Tax Information Exchange Agreements with various countries.
Further, recently the Finance Act, 2011 has introduced a new provision, Section 94 A under the scheme of the Income Tax Act, 1961, to provide for anti-avoidance measures in cases of transactions entered into with persons located in countries and jurisdictions which do not effectively exchange information with India.
Further, the recently introduced money laundering law proposed can be expected to deter people from acquiring money/property through unlawful means though it does not have the teeth to eliminate the malevolence of black money.
According to the data provided by the Swiss bank, India has almost US $1500 billion black money in Swiss banks which is 13 times that of the nation's foreign debt and accounts for 40% of GDP of India.
By bringing the black money back to the country, India can incorporate many developmental works and also be able to clear all their foreign debts in 24 hours. Not only these, even if India abolished all the taxes, the government can maintain the country easily for 30 years.
Since 1951, the Government has launched time to time voluntary disclosure of income schemes (VDIS)/amnesty schemes in order to bring the black money generated both within the country and outside. Despite these amnesty schemes, the parallel economy of unaccounted money continues to remain a major challenge. Moreover, these schemes are morally corrosive as they offer relief to tax evaders and penalize honest tax payers by default.