Elephant Bonds- Proposed scheme to bring back Black Money

With a view to make India a USD 5 trillion economy by improving its trade policies and tax structure various recommendations have been received by the High-Level Advisory Group (HLAG) to boost India’s share and importance in global merchandise and service trade, managing bilateral trade relations and mainstreaming new age policy making. One of the recommendations was induction of ‘Elephant Bonds’;

1. ‘Elephant Bonds’ are an amnesty scheme to bring the unaccounted wealth or black money back in India. The black money holders get a chance to disclose their unaccounted wealth by paying minimum tax. However, they have to invest 40% of such wealth in long-term infrastructure bonds (Called as ‘Elephant Bonds’).
2. The benefits under the scheme includes;
   • Immunity from penalty and prosecution under all laws including foreign exchange, black money laws and taxation laws.
   • Tax to be paid at reduced rate i.e. @ 15% of unaccounted wealth.
3. Features of Elephant Bonds;
   • Any person can subscribe to the bonds.
   • 40% of the unaccounted wealth shall be deposited in the bonds.

• Interest will be credited to the subscriber. Coupon rate of interest will be linked to LIBOR (LIBOR plus 500 basis points) and the coupon rate would be 5% (chargeable to tax at the higher rate of 75%).

1. Expected maturity of such bonds shall be long-term around 20 to 30 years.
2. Unlike the traditional Income Disclosure Schemes (IDS) introduced by the government earlier where schemes were not attractive owing to exorbitant tax rate and non-immunity from certain criminal legislations such as Prevention of Money-Laundering Act, 2002, Prevention of Corruption Act, 1988 etc, ‘Elephant Bonds’ are different in its essence, as one side the person would get the immunity from all laws on disclosing of unaccounted wealth and on the other side, the Government would get the enough amount in form of tax and investment in bonds to channelized the funds of infrastructure development in India. The proceeds from issuance of such bonds will be utilized for development of Infrastructure in India.

 Source: Taxmann