NEW DELHI: The Union Cabinet on Tuesday cleared a stringent law proposed in the budget to curb black money, and also decided to sign the financial information sharing pack with the US that will help trace illegal wealth.The Union Cabinet also approved Rs 33,000 crore for states as compensation towards central sales tax for three years, meeting an important condition for states’ support to the proposed goods and services tax (GST). The Undisclosed Foreign Income and Assets (Imposition of Tax) bill will give more powers to the tax department in tracking illicit wealth stashed abroad. It provides for stiff 300% monetary penalties and up to ten years prison for foreign wealth not disclosed.The bill would be introduced in the Parliament in the current session. Banks and other financial institutions will also face action under the new black money law if they are found to have abetted stashing of illicit wealth, along with the action against the perpetrators and beneficiaries of this crime. Finance Minister Arun Jaitley had in his budget speech last month announced the government will frame a new law to check the blackmoney menace and a bill in this regard will be presented in Parliament during the current session. The government will also provide a one-time ‘short window’ to the holders of black money abroad to declare their wealth, pay taxes and penalty, and escape prosecution under the proposed stringent law to deal with the menace.The Union Cabinet also approved signing of a crucial accord with the US on exchange of financial information which will supplement India's own efforts to tackle the menace of black money.The Foreign Account Tax Compliance Act or FATCA that makes it mandatory for foreign financial institutions to report accounts of US citizens held with them and also accounts of certain foreign entities with substantial US owners.US will also provide India information on investments by its citizens. Institutions that do not register and agree to report could be levied a 30% withholding tax on certain US-source payments made to them.FATCA, which came into force on January 1 this year, was enacted by the US in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act to combat tax evasion by US nationals holding investments in offshore accounts.India had been unable to sign the accord by December 31 deadline but had expressed its commitment to the agreement.India has opted for inter-governmental agreement that will save its financial firms the pain of negotiating an agreement with US authorities individually. India will start getting information under FATCA from 2017.After demonstrating its strong commitment to fiscal federalism by accepting the Fourteenth Finance Commission recommendations, the government has announced another measure to get states to back the crucial goods and services tax.The Cabinet on Tuesday cleared Rs 33,000 crore for states as compensation towards central sales tax (CST)for three years. The government has already provisioned Rs 11,000 crore in the current financial year towards the compensation for CST reduction.The issue of CST compensation had emerged as a key irritant in centre and states talks on GST under the previous United Progressive Alliance. While states insisted on release of compensation, the centre wanted them to show some movement on GST.Finance minister Arun Jaitley had assured the states of compensating them in full in line with the commitment given to win their confidence. The government is keen to launch GST--which will replace multiple state and central taxes on goods and services-- from April, 2016.The move to provide for three year compensation is expected to complement government's efforts to get states on board to support the comprehensive reform of indirect tax structure that could lift country's GDP by 1-2%. The centre and states had agreed in 2006 to cut CST by 1% every year from April 1, 2007 and eliminate it by April 1, 2010 to coincide with launch of GST. It was reduced to 3% and then 2% subsequently.However, the elimination plan was paused in 2009 due to delay in finalization of GST structure and global financial crisis.