Using Jan Dhan accounts to launder black money must end
There are reports of crooks depositing their demonetised 500 and 1,000 rupee notes into the recently opened Jan Dhan accounts of the benighted rural folks to give them the colour of agricultural income, which is exempt from income tax under section 10(1) of the Income-tax Act, 1961.
The government is seized of the matter and might look into large deposits into these accounts with a microscope.
Crooks might have anticipated this and might have sought safety in numbers - instead of depositing Rs 10 crore in one account, enlist the services of 1,000 rural folks, preferably across districts and even states, so that deposit of Rs 10,000 on an average doesn’t arouse suspicion.
This is part of a larger malaise. A historical wrong is dogging the nation. When you exempt a few types of income or a few types of organisations, they beckon the crooks. Charlatans have a field day.
More fundamentally, one isn’t sure about the constitutional position - merely because agriculture is in the state list, it doesn’t follow it should not be subject to Center’s income tax any more than shops and establishments are exempt from income tax merely because they come under states’ oversight. Shops and establishment are liable to income tax; so must be agriculture income. Be that as it may, Section 10(1) skates on thin ice.
Farmhouses are mushrooming around the periphery of big cities for no reason other than money laundering and luxurious living without being bothered about tax.
Alas, Modi makes a surgical strike against charlatan farmers who have the gall to suggest that they earn their livelihood through farming carried out inside sprawling farmhouses.
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| Farmhouses are mushrooming around the periphery of big cities for no reason other than money laundering and luxurious living without being bothered about tax. |
Come to think of it, big corporates like ITC agro, Tata Beverages and so on do not pay income tax on substantial part of their income. To wit, 40 per cent of a tea company’s profits are deemed to be agricultural and hence exempt from corporate tax. Should this farce go on?
To be sure, small and marginal farmers shouldn’t be burdened with tax. But then there is no income tax on the first Rs 2.5 lakh. Kulaks laugh all their way to the bank.
The convoluted formula of asking those having both agricultural and non-agricultural income to pay income tax on the latter at the rates applicable to the combined income is prone to evasion and barely scratches the surface.
In fact Prime Minister Modi should have made the following announcements as well in his November 8 address to the nation that sent shivers down the spines of crooks and made them rush to jewelers on a nocturnal visit:
1. Abolition of exemption from disclosing small donations, read Rs 2,00,00 and less. Now crooks are going to launder their demonetised notes with friendly parties in a spirit of mutual backscratching;
2. Abolition of income tax exemption to agricultural income retrospectively;
3. Abolition of income tax exemption to religious trusts; and
4. Abolition of income tax exemption to charitable trusts.
Without these simultaneous steps, demonetisation may not have the results desired because crooks are bound to tap one or more of these to camouflage their demonetised notes.