The bill which changes how black money, recovered or declared will be taxed, was passed in Lok Sabha.
Highlights
- Lok Sabha clears bill on how to tax black or undeclared money
- The bill must now be approved by the Rajya Sabha within 14 days
- Even if Rajya Sabha does not clear the bill, it will become law
The government's new proposal on how to tax black or undeclared money was cleared today by the Lok Sabha, where the government is in a majority. The bill must now be approved by the Rajya Sabha within 14 days. If not, it automatically becomes the law. The legislation has been introduced as the next step in the huge initiative launched earlier this month to unearth and penalize black money with the sudden cancellation of 500 and 1,000-rupee notes. The move has plunged the country, especially rural India, into a major cash shortage, which, the government has emphasized as a short-term problem that will be resolved soon.
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The new proposal, brought to the Lok Sabha by Finance Minister Arun Jaitley, was approved today by a voice vote and no discussion amid chaos caused by the opposition, which was upset that the Speaker had disallowed amendments in the bill that it had proposed.
Speaker Sumitra Mahajan said since the bill was of urgent public importance, it had to be passed immediately. Though she wanted a debate on it, she said, it was made "impossible" by the opposition, which has disrupted proceedings continuously since the winter session began last week.
Because the proposal is a Money Bill, the Rajya Sabha or Upper House, where the government is in a minority, cannot demand changes. It can only make suggestions which the Lok Sabha is not obliged to consider.
All old 500 and 1,000-rupee notes must be deposited in banks by the end of the year. Deposits over 2.5 lakhs will be studied by tax officials. So far, nearly 90 billion dollars of the old notes have been placed in banks.
Under the new proposal, the government says black money that is now disclosed in accounts will be taxed and penalized at 50% of the amount.
Of the rest, 25% will be used by the government for four years in a special new fund that will be called the Pradhan Mantri Garib Kalyan Yojana and will be used to pay for irrigation and other infrastructures. No interest will be paid to the owner for this amount during the four-year lock-in.
The remaining 25% of the disclosed amount will be available for immediate use to the owner. If the owner refuses the option of the government bond mentioned above, 85% of the amount will be taken in taxes and penalties.
For money that is found in raids, taxes and penalties will take nearly 90 per cent of the amount, leaving 10 per cent with the owner.
The winter session of parliament has been largely stalled so far with the opposition adamant that Prime Minister Narendra Modi must explain to them his shock withdrawal of high-denomination notes. It says demonetization and the resultant cash crunch is punishing not the rich, but the poor, especially in rural India, which is excluded from banking and digital transactions.
The government has said that the PM will speak during the debate "if needed" but that he is not required to attend the entire proceedings and offer a reply at the end.
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