Sunday, Sep 25, 2022

Enforcing Rs 15-lakh cap on cash holding difficult; idea still being examined, says Hasmukh Adhia

Revenue Secretary Hasmukh Adhia speaks to The Indian Express.

revenue secretary, Hasmukh Adhia, black money, cash transaction cap, limit cash transaction, ban cahs transaction, no cash transaction, SIT, indian express news, india news, business news Revenue Secretary Hasmukh Adhia. (File Photo)

Even as the government put in a cap on cash transactions at Rs 3 lakh based on recommendation of the Special Investigation Team (SIT) on black money, it did not accept the other recommendation of capping the cash holdings of companies and individuals at Rs 15 lakh as it could have caused difficulty to many people such as businessmen and small traders. Edited excerpts:

The government has accepted the recommendation of SIT to ban cash transactions above Rs 3 lakh but there was another on limiting cash holding at Rs 15 lakh per person. Any specific reasons why it was not accepted?

It requires further discussion because it may create genuine difficulty with certain class of people such as traders and contractors. We had put both these recommendations in public domain, there was more opposition to the second one (Rs 15 lakh cash holding). Also, enforcing becomes quite a challenge because in the name of checking cash balance with any trader, a tax inspector can walk into anybody’s premises.

Enforcement is very difficult in that area. While in the case of cash transaction above Rs 3 lakh, it is possible to enforce it. Suppose you are a pandal wala and I am having a marriage function at home. I am having all cheque income only. You insist that I will take Rs 5 lakh for pandal only in cash. Then, I can withdraw from bank and give you and then I’ll complain to income-tax department and you will have to pay penalty.

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Enforcement is easy where there are two parties, one party is also affected so the honest person can protect himself. Hospitals used to invariably take everything in cash, now that hospitals will be charged a penalty, if they take anything more than Rs 3 lakh (in cash).

The Budget has increased powers to the tax officials for searches…

We have not increased anybody’s power, this is a misnomer. All I-T assessing officers, which are more than 8,000 in the country, they all have the powers to seize the bank account of anybody but the investigating division, which has got fewer officers. Officers who are of higher rank than this, did not have the power. So we have just extended this power to the investigating division because when they go for investigation, once they notice that this person has got so many bank accounts, unless they have powers to seize the bank account, then they have to wait for the investigation report to be completed, send it to assessing officer, who then can only seize his bank account, put a freeze on his bank account. By then money would have been withdrawn.

They may not explain the reason for searches?


He has to get the satisfaction note approved by a senior before going to search the premises…So, this power is extended only to that set of investigating officers but they are few in number, higher-ranked officers. But it was by omission that they didn’t have this power.

Will demonetisation help you widen the tax base?

The main benefit which has come in is that money has lost its anonymity. We know exactly who is holding how much cash. It is a different thing that people have tried to fragment their cash into different accounts but we will try to map them on a computer and see what is happening. This will help us immensely.

Other data mining exercises were also being done for detecting tax evaders and high net worth individuals before Operation Clean Money. How many of such exercises are being done?


They are all part of Operation Clean Money now. Whatever exercise we do and this is only the first phase, there will be phase two, phase three, phase four. It will go on for two years. But these are immediate high-level cases, which are apparently appearing to be odd…so nobody should think that their turn has not come in the first list, so they are spared.

The I-T department is encouraging people to come under Pradhan Mantri Garib Kalyan Yojana? What is the response under that?

We won’t tell you the figure, we will only declare that on March 31. But, yes obviously that is the window available right now. If some of the people who feel that they have done something wrong, this is the time to declare it. Because once even after such seriousness shown by the government, the people are going to take it in a cold way, then we will have to conduct some searches and once they are searched, they will have no way to go under PMGKY also. Right now, based on that data we have flagged, if they want to come forward, they should do it immediately.

The Prime Minister said two months ago at a Sebi event that stock market players pay less taxes.

That was a general observation made by him, which is quite true.

Do you share that view?


It’s a fact. Everybody knows that. Why should one be taxed higher, if he invests in house property vis-a-vis if he invests in a listed stock. Naturally, there’s an unfairness about it. So it will be our attempt to bring uniformity. Last year, we brought down period for long term gain for unlisted shares from 3 years to 2 years. This year we did it for immovable property from 3 years to 2 years. And, we will do further reforms to bring uniformity. But we thought this is not the year to do it.

Maybe in due course?

We will think about it.

There was no explicit mention of General Anti Avoidance Rules (GAAR) in the Budget


GAAR we have already clarified before Budget, we have said that it is coming.

What happens to nations with whom India does not have a Limitation of Benefit clause?


Then we will have to examine it, the misuse of benefit, whether it is an impermissible tax avoidance arrangement because of which they are coming through that country. So that will be then examined.

So, will it be examined only on case-to-case basis?

Yes. Also, there is a limit of Rs 3 crore of tax evasion beyond which only GAAR applies.

On the clarification regarding FPIs in Budget, it has been done retrospectively only for some FPIs.

It is a beneficial change. It has been done only for FPI I and II…they are not into regular sale of (entire) companies, FPI means that you invest in some stock in India. It is a fragmented investment that you make. So there maybe say a FPI who has invested in Indian stocks, that FPI is located in another country. Now, there would be some fund which would investing through this FPI, now that fund may have investors from all over the world. Suppose if it is an India-focused fund only and suppose there is more than 5 per cent share of one company in that fund, then by definition, they will be subjected to indirect taxation when they sell the stake there. It is not the intention, the intention is to catch big companies who transfer the whole company outside by indirect transfer. So we want to limit that indirect transfer provision only for genuine cases of capital gain where the proportion of capital gain is very high. This is not for small and sundry investors. That’s why we have clarified that this won’t be applicable for FPI I and II categories.

But what about other categories of foreign investors?

We have said one more thing that if someone has invested in Indian stock and if his capital gain outside is out of the Indian stock, then capital gain (tax) will be normally applicable. Suppose there’s a fund which is investing in Indian stock, so the valuation of the fund will depend on the long-term capital liability or short-term capital liability of shares which have been changed in the portfolio. So one level of taxation is already done, how can we apply second level of taxation. That’s why even those cases we are exempting by way of circular.

Has Vodafone come forward under the dispute resolution window?

No, I don’t think so. Not yet.

The Finance Minister said in the Budget that between Rs 2-80 lakh, there were some 1.09 crore bank accounts and for more than Rs 80 lakh, there are 1.48 lakh accounts. This totals up to deposits of over Rs 10 lakh crore…

Some of them might be legal deposits by big companies.

This means that the deposits of up to Rs 2 lakh in accounts were not sizeable?

Na na, woh zyaada nahi hai, main isi mein hua hai. Rs 2 lakh se upar wale mein hi hua hai. And people thought Rs 2.5 lakh tak safe hai toh most of them have done Rs 2.25 lakh (deposit) in everybody’s account, 10-15 members. We have cases in which 20 accounts are connected with single PAN.

Between Rs 2-2.5 lakh?

Yes. People have tried all means.

But the Rs 2.5 lakh tax exemption limit is per person.

Yes, that was for genuine housewives, who may be having some savings…same name, same address have been found in different banks. All that computer can find out. Now, PAN is made compulsory. Everyone must do it before February 28.

First published on: 03-02-2017 at 12:41:18 am
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