Its true that india's economy is spoiled by Black Money, Black money can be con

vereted into white by donations to PM funds, National emergency fund, Forming ed

ucational institutions and trusts.

Black money refers to moneys,properties etc which are held and enjoyed by person
s who do not account for it under Law,escaping tax liability on the same.Example
s of such black money can be found in benamy transactions in sale/purchase of pr
operties.Also various trade malpractices resulting in suppression of income earn
ed can accumulate black money.Physical money hoared in bank vaults,whose source
is hidden can be one more instance.Conversion of black money into white money ta
kes place when someone owns that money as his own showing it as earned by him or
when someone documents that he has given a loan .usually traders,realestate pei
ple and big business people. hoard money,resulting in black money.
Very Interesting Interview ...
Black Money in India: An analysis of its menace & growth: K V M Pai - Interview
Team Mangalorean
Mumbai, Feb 11: K Vasanth M Pai (retd.) Chief Commissioner of Income-Tax, Mumbai
, originally hails from Mangalore. He was born to Kulyadi Panduranga Pai and Lee
la Pai on 26 Nov, 1941 at Mulky, in D.K District. He completed his M.Com, IRS. P
resently, he is leading a retired life with his wife Mrs Gayathri Pai at Kadri R
oad, Mangalore. The couple has two sons K. Radhakrishna Pai and K. Prashanth Pai
. Both of them are working in the SAP field in USA. Pai retired from active serv
ice in Nov. 2001.
One of the highpoints of his distinguished career as Chief IT Commissioner, Mumb
ai was the manner in which his team carried out a thorough probe on the assessme
nt of tax liabilities of the accused in the Securities Scam of 1992, including t
hose of the Harshad Mehta group. The result of the said famous case is now histo
ry. Pai has presently put forth some extra-ordinary proposals in his document ti
tled Black Money in India: An analysis of its menace and growth , to counter the me
nace of black money in the Indian economy. The suggestions made by Pai assume gr
eater significance in the light of the current scenario of the funding of terror
ist activities in the country and abroad.
In a telephonic conversation with Mangalorean.Com, Pai talks extensively on the
said topic.
M.com: Mr Pai, why are you so keen on having Indian money deposited in Swiss Ban
ks, being thoroughly investigated?
Mr. Pai: According to a Swiss Bank Report of 2006, Indians hold money deposits o
ver there to the tune of a staggering $1,456 billion or $ 1.4 trillion. This amo
unt is much larger than even the total value of deposits held in Swiss accounts
by other countries such as USSR, China, UK and Ukraine. These are undoubtedly mo
nies of questionable origin, on which obviously Income-tax has not been paid in
India, which the public here are by and large unaware of.
Let me inform you that this amount is about 13 times larger than our country s for
eign debt. Once these huge deposits comes back to India, our entire foreign debt
can be repaid in 24 hours. In fact, after paying off the foreign debt, we will
still have a surplus sum 12 times larger than the foreign debt. Moreover, if thi
s surplus money is invested in earning interest, the entire amount of interest w
ill be more than the annual budget of the Central Government. To give you a clea
rer idea, let me inform you that the Income-tax collections of the Central Gover
nment under the Annual Budgets 07-08 was Rs. 3,04,445 Crores.
As of today there is a huge pile of Indian black money lying in Swiss Bank Accou
nts and I personally consider this money one of the largest loots witnessed by t
he mankind in the entire economic history of the world since 1947. Hence my pain
staking endeavor to have these monies in Swiss Banks being thoroughly investigat
ed and action taken forthwith without any delay.
M.com: What makes you confident that the Swiss Authorities would be willing to d
ivulge to the Indian Govt., details of all such obviously furtive accounts of In
dians?
Mr. Pai: Recently due to immense international pressure after 9/11 terrorist att
acks on the twin towers in US; the Swiss Government has agreed to furnish inform
ation on individual accounts in the Swiss Banks such as names of Account holders
etc. This is only if the concerned governments formally ask for it. Unfortunate
ly, our Govt. has till date not asked for any such details from its Swiss counte
rpart.
This task requires immediate action on part of the Govt. of India, considering t
he huge deposits lying there. Hence, one more significant part of my endeavor is
to ensure that our Govt. acts swiftly on the matter. One other important develo
pment has come to the notice of reporters around the world, and that is about 80
,000 Indians visit Switzerland every year, of which 25,000 are regular visitors
to that country. This aspect too needs to be noted and thoroughly investigated.
M.com: Can you give us an idea on the extent of tax evasion in India?
Mr. Pai: According to a study made by Mumbai Income Tax charge, on the basis of
results of earlier surveys and search cases, none of the taxpayers concerned dec
lared for taxation purposes anything more than 25% of their true incomes, after
1999. This is indeed shocking. The figure arrived at was given to the press spec
ifying the basis on which it was arrived at. Significantly not a single protest
was received from any of the taxpayers, including companies.
In fact, there is every reason to believe that there is higher degree of tax eva
sion in the case of companies, which often resort to camouflaging their capital
investments and showing it in their books as if it is explained capital for inco
me tax purposes. The recent IT Company Satyam scam is clearly a case in point. T
hese kinds of tax evasion devices in the accounts and such devious methods needs
to be properly investigated by the Income Tax Department. Some of the companies
have shown their entire capital as having come from the countries regarded as T
ax Havens such as Switzerland and others.
M.com: I understand you have offered some path-breaking proposals to tighten the
noose on those who stealthily siphon off money and deposit it in foreign accoun
ts. Can you enlighten us?
You are right; I have made these proposals in my comprehensive document on the g
eneration of black money in the Indian economy and the I-T department s role in ch
ecking it. My suggestions made therein are of immense significance for the India
n Economy. This document I sent last week both to the office of the Prime Minist
er (PMO) and the Central Board of Direct Taxes (CBDT) Chairman NB Singh. I am ha
ppy to learn that CBDT, the apex body for tax matters in India, is actively cons
idering my proposal that will allow the income-tax department to ask for informa
tion on accounts held by taxpayers in banks abroad.
My simple but most effective solution is to add a new column in I-T returns form
, to seek this information. My other proposal calls for a change in regulations
that will enable the I-T department to reopen the assessment beyond six years as
stipulated now, in case the taxpayer is found having undisclosed accounts abroa
d. Omission of information or furnishing wrong information will invite penalties
.
M.com: What are some of the major solutions you can offer to counter tax evasion
by Indians?
Mr. Pai: Undoubtedly, I would say computerization of the entire IT Dept. and mod
eling it on the lines of those in the U.S. I have suggested some evolutionary me
asures to be undertaken in this regard in my document. The first step to be take
n for evolution of computer system, as in USA, is the number to be allotted to e
very tax payer in India. In U.S., a Social Security Number is provided for ident
ification of every taxpayer.
Here we have the Permanent Account Number (PAN No.) for the taxpayers. But I thi
nk the system of allotment of PAN Numbers is defective and it is to be considere
d whether the system should continue after making certain modifications and elim
inating of errors within. In India there is a huge problem of people not filing
their IT returns. With computerization it will be possible to detect such cases.
However, the system of identification of the new taxpayers should be scrupulous
ly implemented and applied for use by the IT department.
Since one of the peculiar features of the Indian economy, is the fondness of cer
tain segment of tax payers to indulge in black money and engage in cash system o
f payment, there is an urgent need to regulate the same and ensure that almost a
ll payments are carried out through cheques and bank accounts only. Our parliame
nt needs to lay down strict guidelines and legislation for this purpose, and the
implementation of the legislation should be effective and thorough. Thus by bri
nging together all funds of the economy under the banking system, the total succ
ess of the computerization of the IT Dept. will be definately assured.
I also proposed that adequate provision be made in the Union Budget for expenses
pertaining to adoption of computerization of the entire Income Tax Dept. It sho
uld be noted that when in 1963 computers were first introduced in U.S. Income ta
x dept., along with that stiff penalties and punishment of 5 years imprisonment
was imposed on taxpayers failing to account for any item of income as detected b
y the computers. Our government too must consider similar provisions and incorpo
rate it into our tax laws. In view of all these advantages I suggest that the co
mputer system of the U.S. be studied in detail and plans be drawn up for impleme
ntation of the same in India.
M.com: What would you like to say in conclusion?
Mr. Pai: Well, I would like to quote Prof. B.R. Shenoy, one of the leading econo
mists of the country who very aptly remarked way back in 1962 that "The black ma
rket sector of the Indian Economy today, is well past the take off stage of deve
lopment. The phenomenon is revolting to the national conscience. But there is no
remedy to it other than to strike at its roots by an abandonment of the policie
s of Statism."
The source of black incomes in India is now well known, as evasion of tax on nor
mal income and incomes from crime or corruption. It is now time for active citiz
enship. In other words, it s now the turn of the ordinary citizens to demand actio
n from parliament, judiciary, executive and civil society. All of us must demand
swift action from our administrators which in turn will help in checking this m
enace of black money to a large extent.
Mangalorean.com wishes Mr. & Mrs. Pai all the very best and a happy retired life
.