While there is much political criticism of black money stashed abroad, many Indians are now waking up to the possibilities of bringing back money saved abroad without violating the Indian laws

Every political party, in particular, the Bharatiya Janata Party (BJP) is criticising the government of allowing black money to be stashed abroad. But there is more to this practice of Indians saving or investing money abroad over the years. There is much stress in the economies and markets in foreign countries, and assets acquired abroad in earlier years by Indians are sometimes depressed now. Many Indians are eager to bring the money back to India, if the government would permit it within the existing laws in India. These issues were discussed in a session by international investment and taxation expert Anil Harish at a Moneylife Foundation seminar on Tuesday, 13 December 2011.

Simultaneously, the Indian government is also trying to get a fix on overseas assets of Indians and exploring the possibility of bringing them under the tax net. Recently, an employee of the foreign bank HSBC gave a list of 700 names of Indians with their overseas bank account particulars to the French government. This was forwarded to the Indian government. The list was taken up for investigation by the Income Tax department. It was found that money stashed abroad could be in trusts, companies under trusts, personal accounts of individuals and numbered accounts of individuals in foreign banks. The I-T department went in for search and seizure operations in some cases of resident Indians and also sent notices to the account holders in the case of non-resident Indians. This is causing tension to Indians, who suddenly have to answer questions on assets abroad.

One example that Mr Harish narrated is of a non-resident Indian, who was questioned by the I-T department. He agreed that he had overseas accounts in London, America and Geneva. The officer wanted to know more about the HSBC account in Geneva. The non-resident admitted that he had $2.5 million in that account and the officer politely corrected him that there was $2.4 million in the account. Clearly, the officer already had the information from the French government through the HSBC employee.

Indians with foreign accounts are being questioned on whether the money emanated from India and whether the income was accrued in Indian transactions or operations. The government is questioning them whether the old remittances are legal and whether there is any tax liability which has been avoided. If found out, these accounts would also come under the Indian government’s tax net.

The Indian government has already given an undertaking to the Supreme Court that there would be no more amnesty schemes to bring back black money saved abroad. With foreign economies already in difficulty, Indians are looking for creative ways to bring back such money back into India legally.

Mr Harish came up with the illustration of a client with money saved abroad, who wanted to bring it back to India. He had litigation with a relative and he was eager to comply with the tax laws and bring the money back. It related to a remittance of $1 million made in the year 1999. By the year 2004-05 it had increased with interest to $1.2 million and by now to $1.5 million. To do so, his approach was to pay income tax in India for the $300,000 of interest income from 2004-05 to now, and if required pay the penalty for late payment, and to bring back the $1.5 million. The I-T department usually limits its investigations to seven years of returns filed by the individual.

Giving an international flavour, Mr Harish referred to the USA, where there is a Voluntary Disclosure Scheme for overseas accounts. Even if there is no tax liability, there is need to disclose the existence of the accounts and to give balances over a period of time. Not complying with the law could lead to the payment of penalty of 25% of peak balances in such accounts from the year 2003.

Thus, there is much excitement and activity in India and abroad, to both investigate money saved abroad, and to bring it back to India, by complying with the laws of the country.