NEW DELHI • By the time an Indian deadline for declaring illegal assets expired yesterday, billions of rupees hidden in foreign bank accounts or funnelled into property abroad would have emerged into the light - or so the government hoped.
Prime Minister Narendra Modi took power last year pledging to crack down on the "menace" of so-called black money - vast piles of wealth kept secret from the tax authorities - with a battalion of new measures.
A three-month window that ended yesterday allowed tax evaders to declare their stash and pay a softer penalty, with immunity from prosecution, or risk up to 10 years in jail if they get caught.
But the challenge of cajoling back into the economy the US$439.59 billion (S$628.3 billion) that fled India illicitly from 2003 to 2012, according to estimates from the Global Financial Integrity group in Washington, is dizzying.
India is one of the most cash- intensive societies in the world. Corruption is endemic and strict tax laws encourage people to keep money off the official books. The wealthy channel money to tax havens such as Switzerland or Singapore, convert it into jewellery, antiques, paintings or property, or send a relative abroad for half the year to avoid tax.
"The intention is clearly to target Indian citizens who have stashed wealth overseas and want to come clean," EY partner for India tax services Sonu Iyer said of the declaration window. "It is a warning before the government brings in a very harsh law."
The Black Money Act is the latest in a widening crackdown by India's government, which has set up a team of regulators and former judges to identify illicit account holders and repatriate hidden funds.
It has started bringing in biometric identity cards tied to bank accounts and, last year, handed a secret list of 627 people suspected of concealing money abroad to the Supreme Court.
The tough stance comes as the global net tightens on tax evaders, with new information-sharing accords between countries and even secretive Switzerland releasing the names of suspect account holders in May.
"Those days when people could hide things abroad and think they will never be found out are largely behind us," Mr V. Anandarajan, joint secretary of the Central Board of Direct Taxes, told a forum last week.
On the domestic front, targets for investigation include temples and ashrams, where lavish donations can be a front for money laundering, and cricket betting. The property sector too is awash with black money, with analysts saying cash is a component in most transactions.
"Realty is one area where black money is huge," managing director Pankaj Kapoor of Liases Foras, a real estate research firm in Mumbai, told Agence France- Presse. "Politicians, investors, entrepreneurs park money, then cash it out later."
Opinions on the law range from punitive to draconian, with business body Assocham lambasting it in August for spreading "confusion, fear and panic" among investors. The government says it does not seek to name and shame and that its purpose is simply to force shadowy assets back into the mainstream.
But the crackdown has triggered reports of mass anxiety among India's rich, who fear difficult questions may follow if they come forward. Only a handful of people are said to have declared assets so far, although the authorities say they have received 65 billion rupees (S$1.4 billion) and expected most to arrive in the final week.
Former High Court judge Anil Kumar told a forum in Delhi that the promise of immunity may not be enough to allay fears of retribution. "There is still ambiguity in the minds of the people, whether this will exonerate them from prosecution," he said.