The recent hullabaloo about ‘black’ money stashed by Indians in Swiss bank accounts has certainly helped to focus the government’s efforts on recovering these overseas funds, but the country’s interests may be better served by looking at the cash economy inside India. According to the Supreme Court-appointed Special Investigation Team (SIT), Rs. 4,479 crore ($715 million) is held by Indians in secret Swiss bank accounts, but illegal cash inside the country is more than 3 times larger: Rs. 14,958 crore ($2.3 billion).

In its first major disclosure about money held in Swiss banks, the SIT told the Supreme Court on Friday that, of the 628 Indians on the HSBC Geneva list that the government received from the French authorities, only 339 had funds in their accounts, amounting to Rs. 4,479 crore ($715 million). The Income Tax Department has initiated action against 79 of these account holders.

“The department has finalized assessment of 79 assessees (involving more than 300 assessments). An amount of Rs. 2,926 crore ($467 million) has been brought to tax towards the undisclosed balances in the accounts relating to these persons,” the report said, adding that interest would be levied on the taxes recovered.

“Penalty proceedings under Income Tax Act, 1961 have been initiated in 46 cases. Such penalties have been levied in 3 cases so far. With regard to other assesses, proceedings are pending,” it said.

The statement, however, did not disclose the names of the account holders on the list.

At a separate event on Friday, Finance Minister Arun Jaitley said that proceedings regarding the HSBC list would be completed by March 31, 2015.

Interestingly, the SIT’s report also recommends far-reaching and substantive changes to limit the holding of cash that forms the basis of the ‘black’ economy. It said there was an urgent need to “control transfer of unaccounted cash from one destination to other, which at present is rampant”.

The team called for penalties for holding cash beyond a “reasonable threshold, may be Rs. 10 lakh or Rs. 15 lakh” ($16,000-24,000).

“It is to be stated that a number of European countries bar any cash transaction above a particular limit. This can be done in India too,” it noted.

The SIT called for empowering authorities to seize properties of Indians suspected of holding illegal assets abroad.

It also recommended making tax evasion of over Rs. 50 lakh ($80,000) a ‘predicate offence’ or a serious crime, to facilitate action under the Prevention of Money Laundering Act (PMLA).

To stifle the cash-based economy, the SIT recommended making it mandatory to quote one’s PAN for cash and cheque payments over Rs. 1 lakh ($1,600).

It also highlighted the sectors prone to ‘black’ money transactions: mining, ponzi schemes, iron ore exports, as well as the misuse of export-import routes.

- Karan Singh

To Learn More:

Rs 4,479-cr in Indians’ HSBC-list accounts: SIT on black money (PTI)

Black money: SIT finds Rs. 4,479cr in Swiss banks (Hindustan Times)

Govt to Disclose Names of Swiss Account Holders (by Karan Singh, AllGov India)