Synthesis of Black Money and Voluntary Disclosure of Income Schemes (VDIS) in India-New Plans and Perspectives

In India there is dual existence of two economies. One is legitimate economy operated as per state laws. The other one has its own set of transactions which are unreported and therefore, untaxed, known as Black Money. The accumulation of such heavy heaps of undisclosed and illegal money in a shady manner forms a parallel economy. The black money prevails in every other country of the globe, but it is very frightening for a country like India. The present paper aims at designing a model approach of curative measures to tackle black money menace in India with a view to minimize the further creation of black money and bring back funds lying abroad for productive use in India.

These being a conceptual paper, all government measures, policies, practices and achievements to unearth the black money in India have been thoroughly analyzed to compare their merits and demerits.

All amnesty schemes since 1951 have delivered mixed results in the sense that a sizeable number of tax evaders bow down before the Government pressure and tactics. Besides others like bearer bonds and demonetization of high value currency notes, the government came out with VDIS eight times from 1951 to 1997. VDIS (Voluntary Disclosure of Income Scheme) was a very unconventional but successful step. It was an indication of tolerance before hardening the government's stance to dig out black money and wealth. More than 3, 50, 000 individuals along with a sprinkling of companies and firms disclosed their hitherto undisclosed incomes.

The proposed model has been designed by taking facts and figures as well as views of few tax authorities and tax payers. This may not have the universal applicability; thus a more detail study may be carried out before final implementation.

With the help of factual information, a model amnesty scheme has been proposed which may be implemented as a last resort to amend tax evaders. Government in a democratic country like India must look at the various political and allied aspects before implementing the scheme. At the same time it is illogical to punish a person who knowingly or unknowingly committed a blunder by not adhering to the income tax laws. He or she should be given ample opportunities to adopt the path of rectitude and civic responsibility before going for any rigid, drastic and harsh measures to arrest parallel economy in India. The larger objectives would be to balance the interest of the nation and welfare of the dishonest tax evader.

India is a nation of 120 crore people and only 3.5 crore taxpayers. The door for compromising with an errant tax payer should not be closed. A strong and rigid attitude would not only trigger a sense of militant attitude but also would provoke him to take shelter under the court of law. The proposed model has taken all these above aspect and if instituted in due consultation with stakeholders, has the potential to bring an atmosphere of change on the economic front of the nation.

The proposed model amnesty scheme is a first of its kind and possesses all characteristics of a good scheme which takes both government as well as tax evader's interest into consideration. The scheme is meant for the well being of 3.5 crore tax payers in India. The Government should go for these proactive measures with a strong political will.