Most Indians’ Panama A/cs may be Via Legal Channel
Initial inquiries suggest 90% have used RBI’s liberalised remittance scheme
New Delhi: Preliminary inquiries into accounts of about 500 Indians featuring in the Panama Papers don’t appear to indicate large-scale wrongdoing, with most in accordance with Reserve Bank of India (RBI) rules, a government official said. “About 90% of these accounts have used RBI’s liberalised remittance scheme (LRS) but the rest should be prepared to face the music,” he said, underscoring the government’s intent to take action against those who didn’t use last year’s one-time amnesty before India’s stringent black money law kicked in.
The Panama Papers refer to 11.5 million documents leaked from Mossack Fonseca, a law firm in the Central American country specialising in setting up offshore companies that can be used to conceal wealth. INITIAL FINDINGS
Large number of accounts could be legal
Funds flow likely under the RBI’s remittances scheme
Amount can be used to purchase immovable property, invest in equity or debt Authorities to turn the heat on those found in violation Agencies to tap info from other cooperative tax havens
India seeking to restart talks with the Central American country on tax info exchange pact
The leak led to the resignation of Iceland’s prime minister as several global leaders found their finances under public scrutiny, particularly with regard to source of income. RBI Governor Raghuram Rajan had cautioned against jumping to conclusions last week.
“It is important to note that there are legitimate reasons to have accounts outside,” he had said. RBI is part of the multi-agency team set up by the government to investigate the names that figure in the list. The team also includes the Central Board of Direct Taxes and the Financial Intelligence Unit.
Indians can legally open bank accounts overseas with tax-paid income sub- ject to limits. Transfers are permitted under LRS, which was introduced in 2004 with a cap of $25,000, since raised to $2,50,000 (Rs 1.63 crore). Remittances up to that amount are allowed by a resident individual in a financial year for any permitted current or capital account transaction or a combination of both. Undisclosed accounts will face action under the black money law dealing with undisclosed foreign assets that was introduced last year. About $1.3 billion was transferred out of the country in FY15 through LRS, which allows the purchase of immovable property, investment in equity and debt, and donations and gifts among others. About $250 million was used for the purchase of property and investment in shares and debt.
In the decade to FY15, over $8 billion went out through this route, a substantial percentage of which was used for tuition fees and maintenance of close relatives. The Panama Papers included the names of nearly 500 Indians, including celebrities and industrialists, who are said to have parked funds in offshore accounts in transactions brokered by the law firm. The documents were released by the International Consortium of Investigative Journalists (ICIJ) in association with various media organisations around the world on April 3. The ICIJ added a disclaimer that there are “legitimate uses for offshore companies”.
Tax authorities will seek information from other jurisdictions listed in the Panama Papers with which India exchang- es information as part of bilateral or global treaties. FM Arun Jaitley has warned that government agencies will go after those with illegal accounts.
Offshore accounts have long been associated with black money. Before the 2014 election that brought it to office, the Bharatiya Janata Party had promised a crackdown on black money and offshore accounts. Soon after taking over, the Narendra Modi government set up a special investigation team to investigate black money and introduced a new law to deal with undisclosed assets overseas. The compliance window that provided a chance to come clean on such assets had met with a lukewarm response – a total of 644 declarations were made, yielding Rs 2,428.4 crore in tax.
Multi-agency probe into Panama Papers going full throttle Investigations into over 500 Indian accounts revealed in a global expose