Government has banned Rs 500 / Rs 1000 notes to tackle the problem of black money, corruption, fake currency.
Many people are now searching for ” How to convert black money into white money”. It is one of the leading search term on Google.
I do not encourage black money or methods mentioned below to convert black money to white money. Now people may be reaching you to get their black money converted or giving you lucrative offers. The intention of this post is to raise awareness that some of these methods are common in India. Also, income tax department are also aware of such loopholes and will be keeping eye on these.
1a) Declare the black money as this current year’s income and pay normal tax as advance tax.
1b) Dealing with God – You will be surprised that some people are not even sparing the religious place for converting their black money. there are reports in media where temple management is accepting banned notes as anonymous donation, keep a commission and given back new notes to owner.
2) Black Money Agents or offering fee other people – There are agents mushrooming or you will be get many offers for converting black money or depositing money into your account for a fees. As the government will not be investigating the deposit upto Rs 2.50 lakhs, many people are giving offers to others. I am sure that there will be many deposits in the Jan Dhan accounts where there was no previous activity.
Some people are paying 10-30% to deposit their money into your account and pay them back after 2-3 months. Though it may sound lucrative, beware of such offers and you should decline it.
3) Advance salaries – Many businesses are opening bank accounts in name of employees and depositing advance salaries in their account. To make sure money is safe, they have taken away the cheque book, debit cards etc.
4) Using farmers / Showing Agricultural Income : As agricultural income is not taxable, any black money can be shown as income from such sources. If you hold agricultural land, then agricultural income can be shown. There are many middlemen mushrooming in the market which are luring farmers to use this method to convert black money for others for some percentage.
5) Buying gold / precious metals – Many people are buying gold in cash using black money. Many jewellers have increased the prices of gold significantly if you are buying in cash. Income tax dept are keeping close eyes on such transactions.
6) Jeweller – Some Jewellers (nor majority of them) will help you to convert your black money into white. You give cash to them and they will in turn give you cheque after deduction a percentage (5-10%). They will give you a purchase bill showing that they have bought items from your (silver items, gold jewellery etc). You do not need to pay capital gains tax.
7) Showing tuition income or other professional fees: Many people show fictious income by showing tuition fees or boutique business or other professional income. Normally for non earning member of the family. The black money can then be shown as income from that source and convert into white.
8) Bogus Loan Entry – This is very common methods used by businessmen. They show their black money as loan received from friend and relative. They also pay some interest to the relative for using their name as loan entry. Such loan are either not paid for a long time.
9) Bogus real estate deal – People use this method for large amount. They do fake real estate deal, exchange some money and then cancel these deals. The token amount is shown as not refunded.
10) Gift from relatives – Your relative give cheque to you and you pay them back in cash.
As there is cash crunch, many people are using Paytm (mobile wallet) to make transactions without need of cash. Read more about Paytm and how you can use it – here.
Disclaimer – I do not encourage such methods. Pay your due taxes, it is good for economy and your peace of mind. Income tax are aware of such methods and they will be keeping eye on these. So beware.