Of late the Indian Government is taking major steps to tackle the threat of black money. Since the problem can be addressed only in a legal way, India is now entering into agreements with several tax havens for exchange of information pertaining to tax matters. India has completed negotiating 17 new tax information exchange agreements (TIEA) and already signed TIEA with seven jurisdictions.

“India is also playing a major role in international forums in the global crusade against black money,” said Mr. M.C. Joshi, Chairman of the Central Board of Direct Taxes (CBDT), while addressing the International Tax Conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

While the movement towards increased transparency started internationally way back in 2000 it is now gaining the required attention to function appropriately.

Long since been burdened by transparency issues, the Indian Government has more recently come under severe criticism in the wake of several big-ticket scams. As such, India too has joined the movement and is part of peer review group of the Global Forum on Transparency and Exchange of Information for Tax Purposes, as well as the Financial Action Task Force, the Task Force on Financial Integrity and Economic Development, and the Eurasia Group. A dedicated computerised cell for exchange of information is being created in the CBDT’s Foreign Tax and Tax Research Division. It has also adopted a three-pronged approach to tackle the black money issue.

First, it recently completed negotiation of Tax Information Exchange Agreements (TIEAs) with 17 tax havens.

While India had DTAAs with 81 countries, 75 of these did not have a specific clause for exchange of banking information. The Government initiated the process of renegotiation with these 75 countries to broaden the scope of the ‘Exchange of Information' Article in Double Tax Avoidance Agreements (DTAAs), either by way of protocols to existing DTAAs or new DTAAs. As of September, negotiations/renegotiations with 40 countries were completed, achieving another crucial step in its attempt to curb black money.

Also, section 94-A was inserted into the Income-tax Act, 1961, empowering the Government to notify any territory outside India, having regard to lack of effective exchange of information, as a notified jurisdictional area. Simply put, transactions with residents of territories not providing crucial information would be subject to higher more stringent tax and transfer pricing regulations.

With expectations for providing better tax-payer services on the rise, the tax department has had to take necessary steps to prevent tax evasion and avoidance. This in turn ensures that resources are available to the government for development activities and honest tax-payers are not disproportionately burdened.