Informants can get even higher rewards if they provide information about undisclosed foreign assets.
As per a recent government directive, anyone who alerts the Central Board of Direct Taxes about black money or assets hidden away can collect a massive reward of up to Rs 5 crore.
This is a significant jump from the Rs 15 lakh ceiling under a similar 2007 directive, and the government hopes that it will encourage more informants to come forward and tip off the tax authorities.
Another major difference with the Income Tax Informants Rewards Scheme 2018, which according to The Print came into effect on Tuesday, is that informants can collect greater rewards if the information they possess pertains to undisclosed money or assets stashed away abroad under the Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015.
Earlier, under the 2007 guidelines, an informant would receive 5% of the tax liability in the interim with the ceiling set at Rs 1 lakh. After the completion of legal proceedings, when tax authorities would go ahead to recover the final amount, an informant would receive 10% of the tax liability with a ceiling set at a maximum of Rs 15 lakh.
There were no separate rules or rewards set for disclosing assets and money stashed abroad. These guidelines, many believe, did not offer the necessary incentive for informants to come forward with information on properties or cash worth several crores.
In response, the government decided to raise the rewards significantly.
Under the new set of guidelines, any informant who offers details about money and assets stashed away abroad will receive an interim reward (within four months of completion of the relevant assessments) amounting to 3% of the tax liability with the ceiling set at Rs 50 lakh.
After legal proceedings of the particular case are completed, when tax authorities go ahead to recover the final amount, the informant would receive 10% of the tax liability with the ceiling set at Rs 5 crore.
For information pertaining to assets and money hidden away from the tax authorities at home resulting in discovery, the informant will receive an interim award of up to a maximum Rs 10 lakh (within four months of completion of the relevant assessments).
If the cash seized by authorities is above Rs 1 crore, the ceiling set for the interim sum is Rs 15 lakh. The final reward meanwhile is set at 5% of tax liability with the ceiling set at Rs 50 lakh.
“Both an interim award and a final one will be granted to informants if their information leads to a tax discovery,” states the report in The Print.
Despite raising the amount, experts contend that certain issues remain unresolved. Due to the massive backlog of cases in our legal system, the final rewards can often take years to realise. With all the legal options available to tax defaulters, which take time to process under our current judicial system, informants may still have to wait for a long time.
“In a majority of the cases, where defaulters seek legal recourse, informants have to wait for years as final settlements take a long time happening,” said a senior Income Tax official to the Hindustan Times. “In one particular case, an informant has been waiting for over two decades to get his due.”
Additionally, anyone who furnishes “false information/evidence is an offence, and a person giving false information/evidence/ statement will be liable to be prosecuted for such offence.”
So, won’t it deter informants from coming forward? Well, senior tax officials are divided on the subject.
“Many informants are known to inflate or even manufacture figures in tax evasion complaints just to settle scores, and such complaints are often filed under pseudonyms due to the fear of punitive action. This leads to harassment of innocent people and increases the department’s workload. It is important to retain this provision. As the maxim says, let a hundred guilty men go unpunished, rather than punish an innocent man,” said SK Goyal, former chief commissioner of the Income Tax department, to the Hindustan Times.
(Edited by Gayatri Mishra)