The government has sent out about 700,000 notices to suspected tax evaders to coax them to declare hidden income and assets, promising they won't be pursued by the authorities if they pay a penalty now to clear their name.

But, as the four-month campaign draws to a close this week, there looks to be few takers despite a high-profile warning that this is the last chance for tax dodgers to come clean.

Officials privately acknowledge they are likely to miss their internal goal to raise about 500 billion rupees ($7.5 billion) by a wide margin, though there is no public target.

Disclosures up to mid-September would be enough to generate around $1.5 billion in extra tax, one senior tax official and an auditor who advises the government on tax policy told Reuters.

Many entrepreneurs aren't so keen on a scheme that offers little relief: they would have to pay 45 percent in back tax and penalties, and even then would not be sure of keeping the taxman off their back.

One auditor cited the case of a real estate firm in Mumbai that was investigated by the Enforcement Directorate, a financial crime-fighting agency, after disclosing assets under the Income Declaration Scheme that ends on Sept. 30.

"It's better to take sleeping pills than declare assets," the auditor said.

Finance ministry officials said that information received under the scheme was not shared with any other agency.

The government is playing tough, saying tax evaders who pass up this chance would face harsher penalties - up to 35 percent tax and a 90 percent fine - and up to seven years in prison if they are subsequently found out.

But distrust between businesses that often operate in the shadows and authorities that practice what even Finance Minister Arun Jaitley has called "tax terrorism" is hampering the drive.

A businessman in Noida, a booming commercial hub outside Delhi, told Reuters he had wanted to sell a flat to help pay nearly 4.5 million rupees ($67,000) in tax and penalties under this scheme.

But no buyer was willing to pay the price, which was less than half what the businessman paid two years ago, on fears they too could face scrutiny. His tax adviser told him to hold off.

"There is nothing to fear," the adviser recalled telling the businessman. "We will handle this when the tax official comes to your door." Both requested anonymity, concerned they could draw the attention of the authorities.

AMNESTY AMNESIA

The government hopes the scheme will at least partly deliver on Prime Minister Narendra Modi's campaign promise to voters in 2014 to bring back billions of dollars in "black money" from abroad.

The amount recovered, he said then, would be enough to put 1.5 to 2 million rupees ($22,500-$30,000) into the bank account of every poor family in India.

Tax officials said they had gathered information on possible tax evasion through stock exchanges, banks and other sources to identify assets bought with untaxed money.

Early in the current drive, Modi said in a radio address that the government "will not investigate or ask any questions about the source of income" if people declare it voluntarily.

A similar amnesty last year fell short, with fewer than 700 people declaring their foreign assets and paying 25 billion rupees in taxes.

That contrasts with Indonesia, where an amnesty has uncovered $110 billion in undeclared assets because tax evaders only have to pay a 2 percent penalty on undisclosed income.

The Indian government has resisted a broad amnesty for those with hidden wealth due to the risks of a political backlash and court challenges by civil society groups.

Yet despite the threat of prosecution, many seem prepared to take their chances.

"The scheme has not many takers mainly because of an inadequate infrastructure of the tax department to prosecute tax evaders," said Amit Maheshwari, a partner at consultancy Ashok Maheshwary & Associates LLP.

In a country of 1.3 billion, fewer than 18,000 people declared annual income of 10 million rupees or more in 2012/13, the latest figures show, with India borrowing about $155 billion to fund its fiscal deficit over the last two years.

"If we could get our hands on all the tax evaders, India's fiscal deficit could be wiped out for at least two years," said another senior tax official.