This is at present a civil offence and attracts a fine. The department of economic affairs would examine the proposal shortly, a finance ministry official told Business Standard.
False declaration refers to misrepresentation of the value of currency or bearer negotiable instruments being transported.
It also covers misrepresentation of relevant data, which is asked for in the declaration or is otherwise requested by the authorities. This includes failing to make a declaration.
The official said this was a crucial step in attempts to clamp down on money laundering.
The government has also decided that details of all money transfers (remittances to India from overseas) of Rs 1 lakh and above will have to be provided to the financial intelligence agency, which will make the details available to the security agencies.
Even if the transaction is below this threshold, the unit can ask for the data from money transfer agents and sub-agents, who will be required to keep a record of all transactions.
The finance ministry officials feel these changes will meet security concerns. "There have been incidents of terrorist organisations misusing the money transfer facility. The measures will address these concerns", the official added.
Money laundering is a process of converting the proceeds of crimes into legitimate money through a series of financial transactions.
The absence of laws against money laundering in the Indian banking system can come in the way of international banking transactions and relationships as global banks are uncomfortable doing business with countries which do not have these laws.
In the United States, which has some of the most severe laws on money laundering, false declaration attracts a nine-year jail term.