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Indians Converting Black Money To White Through Jugaad Research Team | Posted On Tuesday, November 15,2016, 03:08 PM

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Indians Converting Black Money To White Through Jugaad



The Prime Minister Narendra Modi, scrapped 500 and 1000 Rupee notes in the economy, effective midnight November 8th 2016. This announcement came around 8 PM, giving citizens holding black money, practically no time to convert black money to white. Citizens with black money, had only 4 hours to come up with something unique. Citizens rushed to gold jewelry shops to buy their favorite metal…GOLD. Jewelers kept their shops open…well past midnight. Greedy jewelers sold gold bars and jewelry at 20% and even 30% premium (20% to 30% above its market value). Citizens fought with each other, to be able to buy gold first.

Unscrupulous jewelers, even issued backdated invoices against these gold jewelry sales. (Even though gold jewelry was sold on November 8th…the invoice states a previous date). For gold purchases above Rupees 2 Lakhs, citizens have to give PAN details. Jewelers made sure customer gold jewelry purchases with black money, did not exceed the Rupees 2 Lakh limit. Now citizens with black money, do not have to give PAN details or addresses. Jewelers deposit all this money with banks. Yes…Citizens use gold to convert black money to white. There are more innovative methods. Let’s take a look at some of them.

Convert black money to white using poor people

Several of our poor citizens are standing in long queues, to exchange their 500 and 1000 rupee notes at the bank. Unscrupulous citizens are using the poor, to convert black money to white.You can deposit up to INR 2.5 Lakh in cash and the bank will not ask any questions. You deposit more than this, the bank gives your details to the tax department. Citizens having black money, give cash up to INR 2.5 Lakhs in 500 and 1000 rupee notes to a poor person, who deposits it with the bank….No Questions Asked…..After a few weeks or months, these poor people will return the money to the rich citizen, keeping a small amount for themselves. The black money has been converted to white.

I’m guessing unscrupulous citizens with black money, would have to use poor relatives or someone they can trust.

Give a loan to a poor person

India is a country where several citizens, are always in need of cash. Citizens with black money exploit this need. A poor person is given an interest-free loan. This money is in 500 and 1000 rupee notes. When the poor person repays the loan, black money gets converted to white.

Pay employee salaries in advance

Many businessmen are paying their employees, advance salaries in cash. Employees are getting advance salaries up to 6 to 8 months. This money is in 500 and 1000 rupee notes. Employees can easily deposit this money with the bank, up to December 30th 2016, as several of them get salaries around INR 10,000 to INR 30,000 a month. If you deposit cash up to INR 2.5 Lakhs at the bank, no questions are asked. More than this amount and the tax department gets interested, on the source of this money. 

These employees then withdraw the money a month or two later and give it back to their employer. Employees get a commission for their services, from their employer. What if employees run away with this money? Sure…this transaction involves trust between the employee and his employer. However, several employers are not taking any chances. Many businessmen have opened salary accounts for their employees, to pay advance salaries. The debit cards of the employees are kept with the Company.

Book a train ticket and then cancel it

Indian Railways will accept old 500 and 1000 rupee notes, till November 24th 2016. Citizens with black money are booking expensive first class AC Tickets, then cancelling them. To combat this menace, Indian Railways makes refunds only through bank accounts. To sidestep this move, rich citizens with black money, make the bookings through travel agents. Indian railways refunds these travel agents, through electronic fund transfer. The travel agent then returns the money to the rich citizen. Large sums of money can be converted to white, using this method.

Use farmers to convert black money

Agricultural income in India, is not taxed. Now say a rich citizen with black money gives 500 and 1000 rupee notes, to the farmer. The farmer deposits this money at the bank saying, he sold his agricultural produce before 500 and 1000 rupee notes were scrapped. As agricultural income is not taxed, the farmer easily deposits the money. He then returns the money a few months later to the rich citizen and keeps a commission for himself.

Guess, agricultural income will be pretty high this year, irrespective of whether the farmer has a bumper crop or not.

Donate money at temples

Many rich citizens are literally turning to God, to convert black money to white. They are donating money in 500 and 1000 rupee notes, in temple hundis or donation boxes. Money is made as anonymous donations. Temple officials in connivance with black money hoarders, exchange old currency for new currency notes at banks. This money is then returned to rich donors having black money, after collecting a commission. The Government has said, temple hundis would not be asked any questions on donations. However, if illegal cash is converted through this method, the purpose of demonetization would be defeated. The Government wants temple authorities to open hundis, only in the presence of authorized personnel.

The Government might be innovative and bold in scrapping 500 and 1000 rupee notes, to check black money. Trust our citizens to be equally innovative. Yes….the Government expects a small amount of black money to evade detection. However, most black money cannot escape.

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