As per this agreement under a new US law, Indian financial institutions would have to reveal information about US taxpayers to the revenue department which would be passed on to the US tax authorities. In turn, the US will also share financial information with India. The Black Money Act, for the first time, allows levy of tax in India on assets kept abroad.
Unlawful, undisclosed income abroad has been taxed under this law at the rate of 30 percent with an additional 30 percent penalty.
The law provides for a compliance window for declaring and paying penalty. Failure to meet the compliance timeline will attract an additional penalty of 90 percent for a total tax liability of 120 percent on the quantum of black money stashed abroad.
According to a 2014 report by the Global Financial Integrity, India -- with $95 billion -- is among the top three countries in black money outflows after China ($250 billion) and Russia ($123 billion). The report also states that the cause of black money and illicit financial flow from India lies in a "complex web structure and governance issues". An unofficial estimate of India's illegal money stashed overseas puts it somewhere between $466 billion and $1.4 trillion. Speaking earlier to the media, Sinha said a consensus has been reached on the so-called "Addis Ababa Action Agenda". "We have managed to forge global consensus on some very crucial issues related to the need for balanced development, and also managed to ensure a commitment of 0.7 percent of GDP from developed nations towards official development assistance (ODA), so the overall outcome has been quite successful," he said.
"ODA globally is $135 billion, whereas various estimates by the UN and other bodies estimate tax revenue lost to poor countries at over $300 billion annually, so the importance of tax revenues far exceeds the potential of ODA to tackle development," Sinha said.
"The tax-to-GDP ratio in developed economies is 25-35 percent, while it is only 10-20 percent in poor countries," he added. The Addis Ababa Action Agenda has more than 100 concrete measures addressing a range of issues including technology, science, innovation, trade and capacity-building.