The 2015 law was born from a powerful political campaign vow to unearth and bring back illicit wealth hidden overseas. However, its implementation over the past decade has revealed significant flaws, leading to calls for a more pragmatic approach.
Why is the Law Being Revisited?
The primary criticism against the act is its excessive stringency, which critics argue discourages voluntary compliance—the very goal it seeks to achieve. The law's punitive structure is a major point of contention. For any undisclosed foreign asset, it mandates a flat 30% tax, plus a staggering 90% penalty.
This means an individual with ₹1 crore in an undeclared foreign account could face a total liability of ₹1.2 crore—more than the hidden amount itself. This "more than 100% liability" framework acts as a disincentive for people to come forward and declare their assets.
Furthermore, the act has been criticized for its overlap with the Income Tax Act, potentially leading to double jeopardy for a single offense. Legal experts have also pointed to the lack of discretion given to tax officers and the law's automatic criminal prosecution provisions.
Even for minor, unintentional omissions, individuals face the threat of non-bailable warrants and up to 10 years in prison, making it a draconian tool compared to more flexible global standards.
What Changes Can We Expect?
The expert panel is likely to recommend a rationalisation of the penalty structure to make it more proportionate and realistic. Key expected reforms include:
Reduced Penalties: Introducing a reasonable cap on penalties to encourage voluntary disclosure and compliance.
Decriminalisation of Minor Offenses: Distinguishing between wilful tax evaders and those with minor, unintentional lapses, reserving criminal prosecution for the most egregious cases.
Clarity on Valuation: Reviewing the rule that calculates penalties on the current market value of an asset acquired long ago, which can be unfairly punitive.
One-Time Disclosure Window: Introducing a limited-time amnesty scheme to allow people to declare hidden assets by paying a defined tax and penalty, thereby unlocking frozen wealth.
A Necessary Reform or a Soft Stance?
Proponents of the reform argue that a more balanced law will boost compliance, reduce litigation, and align India with international tax practices. It could ultimately lead to higher revenue collection as more people are encouraged to regularise their status.
However, the move is not without its critics. Opponents fear that diluting the law weakens its deterrent effect and could be perceived as a political retreat from a key election promise.
There are also concerns about moral hazard, where those who complied with the harsh original law would feel penalised.
As the government walks this tightrope, the review of the Black Money Act marks a significant moment. It highlights a shift from a purely punitive approach to a more pragmatic one, acknowledging that for a law to be effective, it must also be enforceable and fair.
The outcome will be a crucial test of India's evolving strategy in its long-standing fight against illicit wealth.
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