Converting of Black money into White money is the biggest searching topic in INDIA after the announcement of ban on 500 rupee and 1000 rupee notes in INDIA by the Prime Minister Narendra Modi. Before going in depth let me explain you what is black money in detail.
What is Black Money? – Black money is tax evaded income. It can be earned through both legal and illegal means. The majority of the black money is the income received in cash not accounted in books and not revealed to the government for tax purposes.
What most of the black money holders are doing is they are wisely spending their amount and depositing into banks in several ways. Let us have a look on how the people are converting their black money to white money.
1.Gifts from relatives and friends on occasions : Any amount of money received from relatives (gift) is exempt from Income Tax. Is it not an easy way to convert black money to white?
2.Agricultural Income : Agricultural Income is exempt from Income Tax. This means the money earned from the sale of paddy, pepper or wheat is exempt from tax. So, the people who earn black money will obtain a fictitious receipt from traders in agricultural commodities as if they have sold the products. For the sake of records, these people will acquire or show the proof of ancestral property in villages.
3.Depositing in banks less than Rs.50000 : This route is taken by small time operators. They open multiple bank accounts and deposit cash up to Rs.50000 at a time. Remember, if you have to deposit over Rs.50000, you have to give PAN details to the banker. Mostly, these kind of petty transactions goes unnoticed by the income tax department and thus, black money is converted to white without paying any taxes.
4.Using Poor people : People holding black money may also use poorer people to convert their money into white by parking the money in their bank accounts.
5.Buying Jewellery : People holding black money may also buy huge amount of jewellery. i.e the person who is buying gold should submit his/her PAN card if the limit goes beyond 2 Lakh . But what if the same person buying jewellery for the cost of 1 Lakh 90 thousand in multiple shops without submitting his PAN card?
And the introduction of Rs 2,000 notes, it shall be even more easier to store large amounts of money in cash. Am I wrong?
Now the big question in my mind is – Is this not known to the Government? What actions will they take to curb the black money?
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