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Demonetisation: 12 ways Indians are converting their money from black to white

  • Only 6% of the illegal wealth is stored as liquid cash. 
  • Poor people are being used for converting black into white money.
  • 200% penalty not legally possible.
12 ways Indian will convert their money from black to white
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The demonetisation of ₹500 and ₹1000 has sent shock waves across the country, and there is still very much chaos, confusion, and suffering reported from across the country. 


Long queues outside the banks and ATMs has become a common sight, and there are various reports floating around about the suffering the poor, underprivileged and remotely located residents in India. 


Sadly, multiple deaths have also been reported in this demonetisation drive that is aimed at recovering black and counterfeit currency. However, till now no major success in the recovery of black money has been reported. 


At a time, when the common man is suffering from no cash situation, the money hoarders seem to be unaffected by this major financial change. 


One of the reasons, why this move is failing to affect the money hoarders is the fact that they keep a very small amount of black money in liquid cash. 


As per an analysis by the Income Tax Department, only 6% of the illegal wealth is stored as liquid cash, rest is available in the form of real estate, gold, foreign banks, foreign currency, benami accounts in Indian banks, the stock market and regular commercial enterprise. 


Apart from these usual methods, here are 12 ways in which the intelligent and corrupt Indians store their black money:


1. Temple donations: 


Multiple reports are indicating that people are donating their black money in temples to make them white. How? The temple management will show this money as anonymous donations, get the new notes, keep a commission and return the majority of it to the owner. 


Since the government has declared that temple donations are not to be questioned, this is one of the best was to convert black into white money. 


2. Gold and more gold: 


Since the announcement, gold prices are touching the sky because people are rushing in to buy gold jewellery to convert their hoarded black money. There has been reports of backdated sales, sale on high premium, and purchase with multiple receipts to avoid exceeding ₹2 lakh limit per purchase since banning of ₹500 and ₹1000 currencies. 


3. Book then cancel train tickets: 


Now that the old notes are accepted in train ticket booking until 24 November, hoarders will book expensive train tickets to cancel them later to get the new notes. The cancellation fee is merge and since tickets are booked through travel agents, people will get cash in return on cancellation of their tickets. 


4. From poor to money mules:


Since the limit of money deposit without ID proof is ₹2.5 lakh, many black money hoarders are using their staff and their relatives to get their money exchanged. In fact, this can be done in the regular banks where the poor will deposit the money (below ₹2.5 lakh) and soon will withdraw the same to hand it back to the owner with a minor commission.  


Giving a loan to poor has also become a way to convert black money into white. As a matter of fact, interest-free loans given to the poor has also become a tool of conversion. 


5. Jan Dhan accounts: 


Post the demonetisation, the Jan Dhan accounts have seemed more than ever transactions. Not all poor people have bank accounts, and in the present scenario opening, a new account is painfully difficult. Therefore, the Jan Dhan accounts are a good medium for converting the currency from black to white. 


The maximum that can be deposited on a Jan Dhan account is ₹1 lakh a year and also there are accounts where the lower limit is ₹50000 if the authority to not follow the Know Your Customer norms. So, these accounts are an effective medium for money hoarders. 


6. Backdated FDs: 


Backdated FDs issued by the co-operative banks as well as credit societies that largely work manually is also their adopted as a method to convert the black money into white. Owners are getting backdated FDs issued in the name of villagers and sooner or later then will get new notes for their black money once the FDs mature. All they need to do it give a cut to the poor villager. 


7. Rise of the banknote mafia:


The announcement gave birth to banknote mafia, the once who exchange old banned currency for valid ₹100 notes after a huge 15% to 80% commission. Later, this banknote mafia will earn a good profit by exchanging the banned black money notes through poor people or various other means.   


8. Advance salaries:


Private business hoarding black money is transferring advance salary to their employees' bank account to convert the money into white. In fact, some businesses opened salary accounts for their employees, deposited advance salary, and kept the debit card with the company so that by 30th December they can convert their black money into white without getting noticed by IT department. 


9. Money laundering firms: 


Operated by chartered accountants, there are firms and companies, that assists people in converting black money into white. These firms use businesses that run on cash and need short-term funds to convert someone's black money into white. In the current, all they need to do is show backdated transactions and get the money converted into white. 


10. Farmers being used:  


The agricultural income which is income by selling agricultural products is not taxed. So, a farmer can deposit any amount of money saying that it is agricultural income to get the new currency. This is another way to go unnoticed by the Income Tax department while converting black into white money. 


11. Using political parties:


Donation up to ₹20000 to political parties does not require identity proof of the one donor, so the parties can deposit the cash in a bank saying the donation was made before the announcement and can get new notes. So, there is a high possibility that political parties will use this to covert insiders as well as outsiders black money into white. 


12. Bank deposit:


Now, many are fearing that if the sum deposited in the bank do not match their income, 200% tax has to be paid, as per the finance minister. But, as per IT authorities, the law does not make this possible. Simply, the depositor can show the large amount as income from other sources in the present assessment year and pay 33% tax. To levy a penalty on that deposit, the government must prove that this income is from current assessment year. 

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