Black to White - ways its happening
1. Temple donations. There are reports of people giving their black money to temple 'hundis' or donation boxes. Temple managements will show this money as anonymous donations, exchange it for new currency notes, keep a commission for this service, and return most of it to the owner. The government has already clarified that temple hundis will not be asked questions. ABP news showed a sting operation in which the priest of Govardhan temple in Mathura was willing to convert Rs 50 lakh of black money into white for a 20% commission. There have been such reports from different parts of the country.
2. Back-dated FDs in co-operative banks and credit societies. Since such institutions still do a lot of their work manually, they are reports they have issued fixed deposit receipts in back date. Owners of black money have reportedly been able to get various FDs in such institutions in names of various villagers in back dates, and will receive new currency notes in due course, after paying a cut to those in whose name they deposited the money. Non-banking financial institutions who accept such deposits are also reportedly acting similarly in helping convert black money into white. Such institutions have long been alleged to be indulging in money laundering. The level of regulation of such institutions differs from state to state.
3. Using poor people as money mules. As the poor stand in queues at banks to exchange their currency notes, there are reports of them being used to convert black money into white. This doesn't even need a co-operative bank. Black money are reportedly finding poor people to deposit Rs 2.5 lakh in cash, since the government has said deposits up to that amount won't be questioned. Such people will then ask to withdraw the entire amount soon, keep some to themselves and return most of it. Since this requires trust, black money hoarders are first and foremost using their staff and their relatives.
4. Giving loans to poor people. Funnelling money through poor people whose bank transactions will not arouse suspicion, is giving way to many creative enterprises. There are also people willing to give interest free loans to the poor - which may seem like a good impact of demonetisation but is actually an effort to convert black money into white and defeat the purpose.
5. Finding Jan Dhan account holders. Jan Dhan accounts have started showing high cash deposits since demonetisation and a part of it is suspected to be black money being laundered. The problem with using poor people as money mules is that they may not have bank accounts. With the banking system overloaded, opening new accounts may take a few days. The government keeps boasting about having opened crores of Jan Dhan accounts but most have seen barely any transactions. Jan Dhan accounts can have deposits up to Rs 1 lakh a year but there are also Jan Dhan accounts which have a lower limit of Rs 50,000 if they don't adhere to Know Your Customer norms. While the government says it will monitor unusual activity in Jan Dhan accounts, it will be easy for a poor person to say the small amount was his life saving at home. There have been concerns about the use of Jan Dhan accounts for hawala operations since the scheme was launched in 2014.
6. Approaching the banknote mafia. Overnight, a banknote mafia has emerged. These are people accepting old Rs 500 and 1,000 notes and giving back anywhere from 15% to 80% of the value in Rs 100 notes. The people collecting old notes will be able to earn a profit by converting them into white, new currency through poor people, or through other means.
7. Paying advance salaries. Businesses having black money have reportedly used old notes of Rs 500 and 1,000 to pay advance salaries for anywhere between the next 3 to 8 months. The idea is to pay each employee less than Rs 2.5 lakh - the limit above which deposits will be examined. In Gujarat, some businesses are reported to have opened salary accounts and deposit advance salaries, keeping their debit cards with company itself. This way they will be able to deposit old currency notes before 30 December and withdraw new ones easily, without attracting the attention of the income tax department.
8. Booking and cancelling train tickets. Since old notes are being accepted till 14 November to book train tickets, there has been a surge in booking expensive train tickets that people intend to later cancel and get refunds in new notes, with a small cancellation fee. The number of expensive first AC tickets booked per day have increased by many times. As a result, the railways have said refunds won't be in cash. But since these bookings are being made through travel agents, even refunds through electronic transfers mean the travel agent will be able to return large sums in new currency notes.
9. Using professional money laundering firms. Run by chartered accountants, there are money laundering companies, most famously in Kolkata but elsewhere too, which specialise in converting black money into white while evading the taxman. Known as 'jama-kharchi' firms in Kolkata and pad-pedi in Mumbai or, they launder money by using businesses such as highway transport which run completely on cash. These 'cash-in-hand' firms match the needs of companies which need short-term funds with those who have excess black money to park. Showing back-dated transactions in the current fiscal is not difficult for such firms. They are said to be burning the midnight oil till 30 December.
10. Buying gold. Gold prices shot up because many black money hoarders rushed to jewellery shops as soon as prime minister Narendra Modi made the demonetisation announcement on 8 November. Many black money owners made the most of four hours they had and bought gold till midnight. There have also been reports, again, of gold selling in back-dated transactions. Jewellers happily sold gold at a high premium. In some shops the demand was so high there was pandemonium with buyers fighting amongst each other to be able to buy first. The government has asked top jewellers to give details of gold transactions after the demonetisation.
11. Using farmers. Since agricultural income is not taxed, a farmer can easily say he got this much cash from the mandi by selling his produce before demonetisation, and here's the old currency, now please exchange it for new one. In this way, any farmer could help launder money, from old currency notes to new ones, for a cut. An investment advisor told, The agricultural income in this country is going to be fabulously high this year, immaterial if the crop is good or poor."
12. Using political parties. Since political parties can collect donations of Rs 20,000 or less without having to reveal who donated the money, let alone their income tax PAN number, they will have the easiest time with demonetisation. A political party can say it collected this amount of cash in old currency donations before demonetisation and demand that it be changed into new currency by 30 December. That also raises the fear that political parties could actually use this method to launder black money of individuals within and without their party.
13. Brazenly putting it in the bank. The finance ministry said those who deposit large sums of cash that don't match their income, may have to pay up to 200% tax. In other words, their money could be confiscated and they may have to pay the same amount as penalty. However, income tax authorities say this may not be legally possible. One can put in a large amount of cash in bank, show it as income from 'other sources' in the current assessment year, and pay 33% income tax on it. To be able to levy income tax penalty on your deposit, the government will have to be able to prove you didn't earn this cash in the current assessment year. more
2. Back-dated FDs in co-operative banks and credit societies. Since such institutions still do a lot of their work manually, they are reports they have issued fixed deposit receipts in back date. Owners of black money have reportedly been able to get various FDs in such institutions in names of various villagers in back dates, and will receive new currency notes in due course, after paying a cut to those in whose name they deposited the money. Non-banking financial institutions who accept such deposits are also reportedly acting similarly in helping convert black money into white. Such institutions have long been alleged to be indulging in money laundering. The level of regulation of such institutions differs from state to state.
3. Using poor people as money mules. As the poor stand in queues at banks to exchange their currency notes, there are reports of them being used to convert black money into white. This doesn't even need a co-operative bank. Black money are reportedly finding poor people to deposit Rs 2.5 lakh in cash, since the government has said deposits up to that amount won't be questioned. Such people will then ask to withdraw the entire amount soon, keep some to themselves and return most of it. Since this requires trust, black money hoarders are first and foremost using their staff and their relatives.
4. Giving loans to poor people. Funnelling money through poor people whose bank transactions will not arouse suspicion, is giving way to many creative enterprises. There are also people willing to give interest free loans to the poor - which may seem like a good impact of demonetisation but is actually an effort to convert black money into white and defeat the purpose.
5. Finding Jan Dhan account holders. Jan Dhan accounts have started showing high cash deposits since demonetisation and a part of it is suspected to be black money being laundered. The problem with using poor people as money mules is that they may not have bank accounts. With the banking system overloaded, opening new accounts may take a few days. The government keeps boasting about having opened crores of Jan Dhan accounts but most have seen barely any transactions. Jan Dhan accounts can have deposits up to Rs 1 lakh a year but there are also Jan Dhan accounts which have a lower limit of Rs 50,000 if they don't adhere to Know Your Customer norms. While the government says it will monitor unusual activity in Jan Dhan accounts, it will be easy for a poor person to say the small amount was his life saving at home. There have been concerns about the use of Jan Dhan accounts for hawala operations since the scheme was launched in 2014.
6. Approaching the banknote mafia. Overnight, a banknote mafia has emerged. These are people accepting old Rs 500 and 1,000 notes and giving back anywhere from 15% to 80% of the value in Rs 100 notes. The people collecting old notes will be able to earn a profit by converting them into white, new currency through poor people, or through other means.
7. Paying advance salaries. Businesses having black money have reportedly used old notes of Rs 500 and 1,000 to pay advance salaries for anywhere between the next 3 to 8 months. The idea is to pay each employee less than Rs 2.5 lakh - the limit above which deposits will be examined. In Gujarat, some businesses are reported to have opened salary accounts and deposit advance salaries, keeping their debit cards with company itself. This way they will be able to deposit old currency notes before 30 December and withdraw new ones easily, without attracting the attention of the income tax department.
8. Booking and cancelling train tickets. Since old notes are being accepted till 14 November to book train tickets, there has been a surge in booking expensive train tickets that people intend to later cancel and get refunds in new notes, with a small cancellation fee. The number of expensive first AC tickets booked per day have increased by many times. As a result, the railways have said refunds won't be in cash. But since these bookings are being made through travel agents, even refunds through electronic transfers mean the travel agent will be able to return large sums in new currency notes.
9. Using professional money laundering firms. Run by chartered accountants, there are money laundering companies, most famously in Kolkata but elsewhere too, which specialise in converting black money into white while evading the taxman. Known as 'jama-kharchi' firms in Kolkata and pad-pedi in Mumbai or, they launder money by using businesses such as highway transport which run completely on cash. These 'cash-in-hand' firms match the needs of companies which need short-term funds with those who have excess black money to park. Showing back-dated transactions in the current fiscal is not difficult for such firms. They are said to be burning the midnight oil till 30 December.
10. Buying gold. Gold prices shot up because many black money hoarders rushed to jewellery shops as soon as prime minister Narendra Modi made the demonetisation announcement on 8 November. Many black money owners made the most of four hours they had and bought gold till midnight. There have also been reports, again, of gold selling in back-dated transactions. Jewellers happily sold gold at a high premium. In some shops the demand was so high there was pandemonium with buyers fighting amongst each other to be able to buy first. The government has asked top jewellers to give details of gold transactions after the demonetisation.
11. Using farmers. Since agricultural income is not taxed, a farmer can easily say he got this much cash from the mandi by selling his produce before demonetisation, and here's the old currency, now please exchange it for new one. In this way, any farmer could help launder money, from old currency notes to new ones, for a cut. An investment advisor told, The agricultural income in this country is going to be fabulously high this year, immaterial if the crop is good or poor."
12. Using political parties. Since political parties can collect donations of Rs 20,000 or less without having to reveal who donated the money, let alone their income tax PAN number, they will have the easiest time with demonetisation. A political party can say it collected this amount of cash in old currency donations before demonetisation and demand that it be changed into new currency by 30 December. That also raises the fear that political parties could actually use this method to launder black money of individuals within and without their party.
13. Brazenly putting it in the bank. The finance ministry said those who deposit large sums of cash that don't match their income, may have to pay up to 200% tax. In other words, their money could be confiscated and they may have to pay the same amount as penalty. However, income tax authorities say this may not be legally possible. One can put in a large amount of cash in bank, show it as income from 'other sources' in the current assessment year, and pay 33% income tax on it. To be able to levy income tax penalty on your deposit, the government will have to be able to prove you didn't earn this cash in the current assessment year. more
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Flat 10-20% tax on all deposits made after 09 Nov should be levied . This will encourage all people to make honest deposits or alternatively GoI should again reintroduce IDS scheme and levie 20/30 % tax and get all black money in the main stream . more
Nov 25
As a special tax @ 20 to 30 %(non refundable) on cash depositions by all charity trusts ,temples ,N.G.O's etc. should be levied with an immediate effect .This will help in minimizing conversion of black to white and if some body does then also Govt will have revenue as Tax on such conversions. more
Nov 24
To curb all this nicely drafted 13 points by Mr Jain is 1) IT department should finalize a blanket rule of say 20% on all your cash deposit will be taken over by govt. All cash holders will run to their bank account willingly and deposit in their own accounts. 2) No concession on any cash deposits at all. Why give Rs 2.5 lacs concession also? 3) After cash money is deposited Bank to deduct say 20% amount and not to return payment in cash except Rs 2000/ per week for saving account holders. With this inputs i suppose it reaches to IT dept/ Govt to understand all 13 points n to bring easy solution for India to be away from corruption. But the Govt should have will to curb corruption. Which itself is difficult. more
Nov 17
There might be plans to scrutinise bank accounts vis-a-vis transactions during the past 12 months and such account holders would be under scanner. more
Nov 16
Any SPIKE in the collection of cash in Temples,in my opinion,should be confiscated,and,credited to the Treasury. more
Nov 16
