For the first time, tax evasion may become a prosecutable offence.
The Supreme Court has appointed a Special Investigation Team headed by two retired judges which have recommended the government to make tax evasion a predicate offence under the Prevention of Money Laundering Act.
Till now, tax evasion was a compoundable offence. A person caught evading tax could admit to his wrongs and pay a penalty to walk free. But if it is made a prosecutable offence, he may face a jail term.
The SIT told the apex court that the Central Board of Direct Taxation must take a decision on this recommendation by March 31.
However, SIT suggested that small taxpayers and the salaried classes be kept out of the purview of prosecution for tax evasion.
It suggested that tax evasion of over Rs 50 lakhs should be made a prosecutable offence.
SIT also recommended the government to impose a ceiling on the holding of cash by individuals. It says no person at any point of time be allowed to possess more than Rs 15 lakh in cash.