To encourage Indians with hidden assets come clean, the central government has decided to soften the tax blow. The amnesty scheme includes that they can pay effective tax -- including surcharge and penalty -- of about 31% instead of 45%, that was stipulated in the Income Declaration Scheme 2016.
The move to lower the tax outgo safely concludes that the government will not question the source of income from which tax is paid on undeclared incomes.
Now if a person declares undisclosed assets valued at Rs 100 crore, his tax outgo would work out to Rs 45 crore under the Income Declaration Scheme. The balance Rs 55 crore would be considered as his legitimate income.
However, if the government does not question the source of income from which the tax is paid, the undeclared income would be Rs 145 crore, bringing down the effective tax rate to about 31%. The government believes that if tax load will be softened that more takers of the scheme would surge.
A huge publicity campaign has already been launched to market the scheme that would enable Indians to come clean or face disastrous consequences.
"We lose our peace by violating rules; why not give correct information about our income and assets to government?" Prime Minister Modi had said in the radio address last week.
The earlier scheme that allowed amnesty to Indians with undisclosed assets overseas failed due to the lack of trust on penalties after coming clean on concealed incomes. The government now wants to ensure that there no such trust deficit, said officials.