The government can do without making tax evasion a criminal offence as the existing income tax laws , which provide for rigorous imprisonment up to seven years for willful default, has not been used effectively to unearth black money , say experts. "One can be jailed for seven years (rigorous imprisonment ) for willful evasion of tax (above . 1 lakh).

However, it is implementation of law that needs to be made effective . The government has not used these provisions effectively" , said Rahul Garg, Executive Director, Tax and Regulatory Services, PwC. Expressing a similar opinion , Uday Ved, Head Tax, KPMG said, "in certain situations , it is still a criminal offence . There are provisions of imprisonment from three months to 7 years... In my career of 25 years, I haven't seen anyone going to jail for income tax lapses" .

Facing flak from civil society for not doing enough to deal with the black money, the government has already set up Directorate of Income Tax (Criminal Investigation ) and is looking at the possibility of making tax evasion a criminal offence if the source of income is illegal. "If there is an element of illegality about the source of income or if funds are used for illegal purpose... we can think of classifying these as criminal tax offences" , the Finance Ministry official had said.

Under section 276C of the Income Tax Act, 1961, persons willfully attempting to evade taxes, penalty or interest can be punished with rigorous imprisonment ranging from three months to seven years with fine.

Ved pointed out that even a third party can be imprisoned for helping tax evasion. "Draconian laws do not solve problems . Current laws have enough teeth.

Just effective implementation is required" , said N C Hegde, Partner Deloitte Haskins and Sells. The investment environment , he said, has improved after the government replaced the Foreign Exchange Regulation Act (FERA ) with a business-friendly Foreign Exchange Management Act (FEMA).