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SIT recommends enacting tough laws to curb black money

27 Jul 2015 Evaluate

The Supreme Court-appointed special investigation team (SIT) headed by Justice M B Shah (retd)  has recommended enacting tough laws to curb betting in cricket, bring donations to education and religious bodies under tax net, monitoring unusual rise in stock prices and most importantly regulating P-Notes. The SIT suspects that the P-note route is being used for the purpose of tax evasion and has also asked Sebi to compulsorily identify real owners of foreign funds coming through the controversial P-Note route and also prosecute those using equities for tax evasion.

With half of the Rs 2.7 lakh crore overseas investments using P-Notes coming through tax havens of Cayman Islands, Mauritius and Bermuda, the SIT, tasked with curbing black money, urged Sebi to ensure that it is able to track the actual beneficiary of the P-Note investments and called for restrictions on transfer of the instrument. The Securities and Exchange Board of India (Sebi) is likely to review the regulations governing participatory notes (P-notes). Sebi had in the past raised concerns on the misuse of P-notes.

The panel has suggested measures to ensure donations by cheques to prevent black money generation in education sector, religious bodies and charities, and sought prosecution of those donating and accepting unaccounted money under the anti-corruption law.  For this, the panel said it would require legislative change which is necessary because now-a-days donation to educational institutions, which are in demand, is rampant.

Regarding present measures taken by the market regulator, the panel has said that it is not enough for Sebi to ban individuals and companies from stock markets and the regulator needs to initiate prosecution proceedings and take all necessary 'preventive and punitive' actions. To prevent misuse of exemption on Long Term Capital Gains (LTCG) tax for money laundering, the panel has suggested a slew of measures such as having an 'effective monitoring mechanism' by Sebi to study such unusual rise of stock prices. 

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