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The Finance Minister clarifies that the Rs. 6,500 crore, talked about by Prime Minister Narendra Modi in his Independence Day speech, pertained to account holders in LGT Bank of Liechtenstein and HSBC Bank, Geneva.

Just a few days following the closure of the Modi government’s compliance window for the declaration of foreign assets and income under the Black Money Act, Union Finance Minister Arun Jaitley on Sunday said that the bulk of black money is within India. He also said that high tax regimes of the past led to an increased incidence of tax evasion.

“The bulk of black money is still within India. We thus need a change in national attitude where plastic currency becomes the norm and cash an exception,” Mr. Jaitley said in post on his official Facebook page.

The compliance window under the Black Money Act closed on September 30, and saw 638 declarations of foreign income and assets worth Rs. 3,770 crore. While those who made the declaration will have to pay tax at 30 per cent and a fine of another 30 per cent, those who failed to make the declaration and who are found with foreign income or assets will have to pay the 30 per cent tax, a 90 per cent penalty, and will face jail time of up to 10 years, Mr. Jaitley reiterated in his post.

The low amount garnered criticism from various quarters including from the Congress and the Aam Aadmi Party.

Congress spokesperson Randeep Surjewala had at the time of the window closing said that the amount declared was Rs. 2,800 crore less than what Prime Minister Narendra Modi had said he would recover during his Red Fort speech on Independence Day. He added that since the BJP had promised Rs. 15 lakh would be deposited in every citizen’s bank account, “the person who misled the nation must apologise”.

The Aam Aadmi Party was no less scathing. “This is a joke on the people of the country. Mr. Narendra Modi had come to power on the promise of bringing black money within 100 days and had also promised rupees 15 lakh in the account of every Indian. Now with disclosure and estimated tax realization announced by the government, it can only deposit only 18 rupees in the account of every Indian,” Aam Aadmi Party (AAP) leader Ashutosh said on Friday.

“The then UF government had launched a similar scheme called Voluntary Disclosure of Income Scheme in 1997. This scheme had yielded more that Rs. 33,000 crore. The Indian economy has seen an eight-fold growth in these 18 years. A disclosure of mere Rs. 3,770 crore only underlines the monumental failure of the Modi Government on the black money front,” AAP said in statement on its website.

Regarding the government’s actions in assessing the quantum of black money stored abroad, Mr. Jaitley said that “most assessments (of money abroad in Lichtenstein and in the HSBC bank at Geneva) have been completed and wherever illegalities are being found, criminal prosecutions have been launched against beneficiaries of these bank accounts”. A total peak balance of about Rs. 6,500 crore in these accounts has been assessed, he added.

The Finance Minister laid the blame for the incidence of tax evasion on the previous governments and their high tax rates.

“Regrettably, our high taxation regime in the past eventually ended up encouraging tax evasion… The early decades after independence witnessed India with high taxation rates, prompting people to evade. The capacity of the State to detect evasion was less than adequate. Over the years, India has slowly started moving towards moderate rates of taxation,” he said, adding that the Modi government was still committed to reducing the corporate tax rate to 25 per cent from the existing 30 per cent over the next four years, a promise Mr. Jaitley had made in his Budget speech.

Mr. Jaitley went on to say that the government was well aware of the need to shift to a cashless economy. “Being seized of this problem, the Government has been working with various authorities in order to incentivise this change. The opening of a large number of payment gateways, internet banking, payment banks and the emerging reality of e-commerce will prompt the use of banking transactions and plastic money to rise significantly,” he wrote.

He added that the government was taking several other steps to curb black money transactions within the country. The government is at an advanced stage in considering making it mandatory to provide PAN card details for cash transactions beyond a certain limit, he said. “The monitoring regime of the income tax (department) has been strengthened and… its ability to detect large cash withdrawals, or large cash transactions which enter the system, is being strengthened.