The Finance Bill 2017: A Controversial Shift in Fiscal and Political Governance

Introduction

The Finance Bill is often regarded as the most important legislative proposal in the annual agenda of the Finance Ministry. Financial policy decisions are initially framed by the Revenue Department, with the Finance Minister’s approval, and then drafted into a formal bill. The process involves extensive deliberations by multiple officials over hundreds of hours to ensure that the final bill reflects the government’s fiscal and economic policies.

However, the Finance Bill 2017 has raised significant concerns, particularly in three key areas:

1. Its classification as a Money Bill under Article 110 of the Constitution.
2. The expanded powers granted to tax authorities and tribunals.
3. Changes in corporate political funding laws.

1. Is the Finance Bill 2017 a Money Bill?

Definition of a Money Bill (Article 110 of the Constitution)

According to Article 110, a Money Bill is one that contains provisions exclusively related to:

Taxation (imposition, abolition, remission, alteration, or regulation).
Borrowing of money or guarantees by the Government of India.
Consolidated Fund or Contingency Fund transactions.
Appropriation of funds from the Consolidated Fund of India.
Declaring or increasing expenditures charged on the Consolidated Fund.
Receipt, custody, and audit of public funds.
Any incidental matters related to the above categories.

Why Finance Bill 2017 Raises Concerns

While Finance Bills have traditionally been limited to taxation matters, the Finance Bill 2017 includes 55 clauses unrelated to the categories mentioned in Article 110. These additional provisions:

Are not directly or incidentally related to financial matters.
Bypass the scrutiny of the Rajya Sabha, where the ruling coalition lacks a majority.

As a Money Bill, the Finance Bill cannot be amended or rejected by the Rajya Sabha—it can only offer recommendations, which the Lok Sabha may choose to ignore. This classification, therefore, raises constitutional and ethical concerns, especially since five amendments proposed by the Rajya Sabha were outrightly rejected by the Lok Sabha.

2. Expanded Powers for Income Tax Authorities

One of the most controversial aspects of the Finance Bill 2017 is its grant of sweeping powers to tax officials.

Changes to Search and Seizure Provisions

Previously, income tax officers were required to:
Record and disclose reasons for conducting raids.
Allow taxpayers to challenge the raid in court.

However, Clauses 50 and 51 of the Finance Bill 2017 introduce amendments to Sections 132 and 132A of the Income Tax Act, which:

Eliminate the requirement to disclose reasons for raids to taxpayers or any tribunal.
Apply these changes retrospectively from October 1, 1975.

This retroactive provision raises concerns that:
Political opponents, journalists, and activists could be targeted under the pretext of tax investigations.
Judicial oversight of tax raids is severely weakened, allowing potential misuse of power.

Critics argue that such unrestricted powers could lead to the return of “Inspector Raj”, where tax officials exercise arbitrary authority, leading to harassment of businesses and individuals. On the other hand, proponents claim that the move protects whistleblowers from retaliation by powerful figures.

Changes to Securities and Depositories Laws

The amendments to the Securities Contracts (Regulation) Act and the Depositories Act grant adjudicating officers broad powers to impose penalties on individuals and entities for failing to provide financial documents. This could allow the executive branch to selectively target individuals perceived as political adversaries.

3. Corporate Political Donations: Transparency Undermined

Previous Law on Corporate Donations to Political Parties

A company could contribute up to 7.5% of its average net profit (over the last three years) to political parties.
The company was required to disclose the amount and the name of the political party in its balance sheet.

Changes Introduced in Finance Bill 2017

The cap on corporate donations has been removed, allowing unlimited funding to political parties.
Companies are now allowed to contribute via “Electoral Bonds”, purchased through banks.
Only the issuing bank will know the identity of the donor—neither the political party nor the general public will have access to this information.

Concerns Over Money Laundering and Corruption

This change reduces transparency, making it easier for large corporations to fund political parties anonymously.
Critics argue that it could lead to money laundering through shell companies.
Public accountability is undermined, as voters will no longer know which companies support which political parties.

Left-wing politicians have argued that this reform will allow corporate entities to dominate elections, further tilting governance in favor of big business interests.

4. Other Key Provisions of the Finance Bill 2017

Tribunal Reorganization and Executive Control

The Bill amends laws governing 17 different tribunals.
It transfers the functions of some tribunals to other existing bodies.
The Central Government is given the power to regulate appointments, reappointments, and removal of tribunal members.

Concerns:
This could erode the independence of tribunals, allowing greater executive influence over judicial proceedings.

Mandatory Aadhaar for Income Tax Filings

From July 1, 2017, Aadhaar is compulsory for filing tax returns and obtaining a PAN card.
This measure aims to curb tax evasion and create an electronic record of financial transactions.

Limit on Cash Transactions

Initially, the Bill capped cash transactions at ₹3 lakhs per day per person per event.
An amendment on March 21, 2017, further reduced the cap to ₹2 lakhs to curb black money and corruption.

Restrictions on Charitable Organizations

Clause 8 of the Bill amends Section 11 of the Income Tax Act, imposing stricter regulations on charitable trusts.
The amendment, effective April 1, 2018, restricts how charities can transfer funds to other trusts.
Critics argue this move targets NGOs, particularly those that receive foreign donations.

Reform or Authoritarianism?

The Finance Bill 2017 presents a mixed picture—while it introduces some necessary reforms, it also reflects authoritarian tendencies in key areas.

Transparency in corporate political funding is eroded, potentially facilitating corruption.
Tax authorities are granted excessive powers, weakening judicial oversight.
The independence of tribunals is undermined, consolidating executive control over quasi-judicial bodies.
Mandatory Aadhaar and cash transaction limits could help combat tax evasion but raise concerns over privacy and enforcement.

While the government justifies these changes as necessary for economic reform, opposition parties and legal experts argue that these amendments threaten democratic accountability. Moving forward, it remains crucial to balance fiscal efficiency with transparency and civil liberties.