NEW DELHI, Dec 23: In an effort to boost declarations under the Voluntary Disclosure of Income Scheme, the revenue department has decided to exempt multinational companies from any penalty for salaries paid in foreign currency for which tax has not been deducted at source.

It is a normal practice in MNCs to pay a substantial portion of the salary to their employees in foreign currency payable at a foreign destination. Since this remuneration is maintained "outside the books" such companies are liable to penal action as no tax has been deducted at source despite the fact that the income in all these cases are within taxable limits.

After this decision by the revenue department, MNCs, which have been hitherto on the wrong side of the law, will no longer run the risk of the taxman's noose coming round their necks.

This is expected to induce declarations from a substantial number of senior executives. They are expected to bite this bait as salaries received abroad are lying "dormant." According to a senior revenue department official, "Most of these senior employees in MNCs and the top consulting companies have not been in a position to use their salaries, many of them have not even been travelling abroad frequently to spend their salaries there."

Revenue department officials are excited by the decision as they expect large revenue collections through this amnesty move. The number of such senior level personnel in the country is not expected to cross a lakh but with each declaration expected to be in the vicinity of a million dollars it will give the tax department substantial revenue. The arithmetic worked out by the tax department is something like this: a declaration of a million dollars will translate into about Rs 4 crore which taxed at the rate of 30 per cent will give the department a revenue of atleast Rs 13 lakh per declaration.

With every passing day as the VDIS scheme comes to a close, an increasing number of people are coming forward to make declarations. According to sources in the revenue department, the success of the scheme is unequivocally being attributed to the multi-media advertisement campaign. "The Rs 30-crore campaign, jointly prepared by Hindustan Thompson Associates and Ogilvy and Mather, has touched that raw nerve which has aroused a degree of fear and a desire to be free from the taxman," a senior revenue department official said.

Regarding gearing up for coming down hard on people who did not come forward to disclose under the scheme, the department is yet to ready an action plan.

The department is currently facing a shortage of resources for which the later battle plan has not been finalised. The department is hoping that at least 5 per cent of the VDIS collections will be allocated to the department to beef up its infrastructure.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.