How to Convert Black Money to White Money – Exposing Loopholes

How to Convert Black Money to White Money

Google Search issued the total traffic received for search request of Query ” How to Convert Black Money to White Money ” and if you are same then go through this article to know how it is done.

In the recent tactic played by the Prime Minister of India – Mr. Narendra Modi eradicates Black Money from the India which is estimated to be in Billions INR or even more. The PM of India announced the economy-crunching notice that illegalized the 500/- and 1000/- tender and circulated the new currency of 500/- and 2000/- over the period of coming few days. This is something almost 120 crores people of India know by now. Narendra Modi has illegalized the 500/- and 1000/- tender which means now you can’t use the given notes anywhere and it will not be accepted as the currency of India. In order to curb and collect the Black Money in India, this step was taken on 08th November 2016 in PM’s meeting at 20.00 Hrs which had literally struck as thunder on crores of people living in India.

What needs to be done now ?How to Convert Black Money to White Money in India

Now that the two major tenders are not into play, people can still invest their 100/- or below denominations for any sort of work or shopping. The major question is, What needs to be done now with the illegalized notes. Narendra Modi has suggested the way out which will be a boon for people who were earning Money and paying taxes, however, those with higher income and were practicing tax evade will not be the culprit who will be snatched by the government official as soon as the “Black Money” is reflected in their accounts.

Method of exchanging old currency into new currency:

As per the directives provided by the Prime Minister of India, the people of India can deposit the 500/- and 1000/- Rupee Notes they possess in their Bank Account or they can exchange their Notes at the Bank or Post office across India. They must have Photo ID proof in order to obtain the exchange. Note that there are limitations on Deposit, Withdrawal, and Exchange or currency for which the information is provided below.

  • Exchange up to 4,000/- Rs Per Day Per Person.
  • The people can Withdraw up to 2,000/- Rs Per Day from ATMs for which the upper limit will be increased later.
  • Withdrawing Cap of 10,000/- Per Day and up to 20,000/- Per Week using Cheque.
  • There is no Limit on Cash Deposit, however, more than 2,50,000/- in a single Day will get you in surveillance as per some speculations and penalty of 200%.
  • No change of Cheque, Debit Card, Credit Card or other Non-cash transactions.

What is Black Money and How it is Generated ?

We all are required to pay some part of our income to the Indian Government in order to sustain the Resources, the infrastructure we are utilizing and to support the growth of the economy. However, some people evade income taxes in order to avoid paying any tax. This transaction is mainly in cash for which there are no records kept and it is not declared as a transaction which creates Black Money. A simple Eg is that consider Mr.AB who wants to buy a plot with a purchase value of 50 Lacs. He plays the 30 lacs as DD or Cheque and rests 20 Lacs are paid in cash. Here, the transactions made through Cheques or DD are accounted by the payment with cash is not revealed. Now he has to pay stamp duty of that  30 lacs only and for the remaining amount, he is not required to pay Stamp Duty or Tax which means 20 Lacs of Black Money is generated.

E.g.

If Mr. King buys a TV Set for an Electronics Store of price 50,000/- plus 14.5% Taxes but ask for any discount. Mr.Sales Guru who is attending Mr. King will quote a discount of 2,000/- without the bill that is 48,000/- for the TV Set. Here if Mr.King buys it, the Black Money of 48,000/- will be generated which will evade income taxes.

How Black Money is Converted to White Money in India?

There are many ways you can evade taxes and convert black money into white money and note that for every lock, there is a key and similarly, for every law against Black Money, there are loopholes. Black Money can not be deposited into Bank Account as it may come under the surveillance of Income Tax officials and hence there are many ways listed below –

  • Hawala Route

If you don’t know what is Hawala Route, continue to read to know. Consider Mr. Politician as having 50 Lacs of cash stashed somewhere. He wants to deposit it in his Bank account, however, if he does so then income tax officials might investigate further to know the source of income for which you must have proper proofs. Now what he does is that he calls his Hawala Agent and handovers the bag full of cash. Now the Hawala Agent will disburse the money to his representatives in the foreign country in form of pounds, Dollars, etc. Now, the representatives will transfer the money to Mr. Politician’s account as Foreign Direct Investment  which has actually converted the black money into white money without paying any taxes. Here, Mr. Politician can choose to invest his “Money”in shares or Properties outdoor.

  • Agricultural Income

Do you know that India impose no taxes on Agricultural Income means selling or buying of Pepper, Paddy, and Wheat, etc? Now Mr. Shortcut will hand over a cut of the total black money to any traders so that he can obtain proper bill or fictitious receipt declaring that he had sold the Agricultural Products that exempts any income tax. Now here, the Black Money is generated.

  • Sales of Diamonds and Gold

Investing your Black Money in Gold and Diamonds is a boon suggestion. Now here, the Mr. ABC has a lot of money, say 90 lacs of Black Money. He will walk into a Jewellers shop and would either buy Gold or Diamonds or he will ask the Jeweller to sanction a fake bill stating that he has sold his diamonds of Gold to the Jeweller. The Jeweller will take the money in cash and would give a cheque to complete the conversion of black into white money. This will help evade taxes to both.

  • Showing fictitious sales

Below if an example of converting black money into white money –

Consider Mr. Film Maker who produces a Movie. In reality, the movie is flop and churns out no or less outcome, however, Mr. Film Makes shows it as a houseful Movie for a complete year. Now he can show his Black Money as the amount generated by Fictional Housefull movie tickets that made the money. Here, he  will have to pay some taxes in order to legalize his White Money.

  • Receiving Black Money as Gifts

Gifts received from our relatives are tax exempted and similarly, gifts received from non-relatives are taxable. Here, what you do is that you can show Hoards of Cash, say 100 crores of black money received as Gifts from relatives. You will have to pay taxes on it, however, you have successfully converted black money into white money.

  • Converting Black Money into White using Cheque –

We all know that depositing black money in your Bank Account will lead you to come under the radar of income tax officials as you don’t have any valid proof of the source of income.  It is one of the most common practices where you can give money to your friend or family member as cash and ask for the money in the form of the cheque. Here, you can show the receipt of cash as a loan given and that the receiver has paid his loan.

  • Purchase of Insurance Policy

Buying Insurance Policy enjoys tax exemption. You can pay the black money and buy insurance of any amount, say 50 lacs, which will actually enjoy exemption from payment of tax and your black money is successfully converted into white. You can discontinue the policy to receive your money subjected to rules and regulations of the insurance provider.

  • Invest in Shares or Property

Apart from converting Black into White, you can even invest Black into Black after which you will enjoy the commodity purchased without the fear of coming into the trap of income tax department.  Example for this sort of practice is that consider Mr. HUY wants to buy a property having the evaluation of 2 crores. He pays 1.2 crores as cheque and rest in cash that is black money which isn’t accounted for stamp duty or other taxes. He can invest the remaining cash into the purchase of other property of share to waive off the black money.

What to Invest Black Money into Black, here how you can do it

  • Buying Luxury Products

Enjoying a lavish lifestyle with the black money is possible. Go to any luxury store and purchase luxury products in cash and now you have that luxury and you don’t even have that Black Money which can get you entangled in any problem.

  • Donations

Making donations of Black Money is a foolproof plan. You can walk into any Institution or organization or NGO and donate n amount of money in cash. Purchasing of the medical or engineering seat with donation is one of the easiest ways.

  • Elections

The maximum amount of black money is invested in elections across the country. You cannot even imagine the amount a nominee spends during the election. As per estimates, a person spends around 70 lacs for Lok Sabha Elections which is nothing but the best way to spend your black money.

Conclusions:

There are numerous ways to invest you Black Money or to convert it into White Money which is a false practice and leads to corruptions and causes decreases in economy. The total amount of black money in India as per estimates in enough to make every pupil of India a Lakhpati or more. The real deal is to pay taxes and not to evade it. And as said, there are always loopholes in any system and the process of converting black money into white money has its own loopholes that will get you behind bars.

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Updated: November 15, 2016 — 10:39 am

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