The Government scrapped 500 and 1000 rupee notes on November 8th 2016. The aim of this move….To break the back of corruption and terrorism in India, fueled by black money, usually hidden in 500 and 1000 rupee notes. The Government allowed citizens who had earned money honestly and paid all their income tax dues, to deposit old 500 and 1000 rupee notes in banks, up to any limit.
The last date to deposit old 500 and 1000 rupee notes…December 30th 2016. Did citizens who had black money hidden in mattresses and cupboards sit quiet? No, they came up with innovative methods of converting black money into white. Jan Dhan bank accounts of poor citizens, were used to convert black money to white. Poor citizens were paid for this service. Agricultural income earned by farmers is not taxed. Unscrupulous citizens tried to pass off black money, as farmer’s income. A lot more innovative methods were used. You can read it here.
Is the Government sitting quietly and watching citizens convert black money to white? No, The Government has come up with some innovative measures to put an end to this menace. Want to know more on the measures the Government has taken, to put a permanent end to black money in India. Just read on.
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Where there is a will, there is a way. Citizens with black money have taken this saying, quite literally. They are using unscrupulous bankers, to convert black money to white. The Government has caught quite a number of bankers from reputed banks, helping unscrupulous citizens, convert black money to white. Just read the newspapers.
The Income Tax department wants to put an end to all this and says…If citizens are caught with black money in a raid and they cannot explain the source of this undisclosed income, they could be charged a penalty as high as 137%.
This is 60% Tax + 60% Penalty + 15% Surcharge + 3% Education Cess = 137.25% in taxes and penalty.
If citizens admit their black money when a search operation is conducted, pay their taxes, file income tax returns before the specified date and give details of how they have earned this money, the Tax Department will charge a tax rate of 107.25%.
This is 60% Tax + 30% Penalty + 15% Surcharge + 3% Education Cess = 107.25% in taxes and penalty.
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The Government has given you a way of escape, if you want to declare black money. Just deposit your black money with the RBI or any other bank, till 31st March 2017. You then pay 50% tax on this amount.
There’s more…25% of the undisclosed income which you declare, will have to be mandatorily deposited in a zero-interest deposit scheme. This scheme is called Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. Your money is locked-in for 4 years. You cannot touch this money for 4 years. No interest is paid to you, on this money which you deposit in the zero-interest deposit scheme.
The Union Cabinet has approved an ordinance, to cap the holding of old 500 and 1000 rupee notes. Now, holding old 500 and 1000 rupee notes beyond a cut-off is illegal, after March 31st 2017. You would have to pay a severe penalty and could even be imprisoned, if you are found holding old 500 and 1000 rupee notes beyond a cut-off, after March 31st 2017.
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According to latest reports, Government officials have clarified that holding demonetized currency; will not land you in jail. The minimum fine for holding these demonetized notes beyond March 31st 2017, will be INR 10,000.
Looks like there’s just no place to hide black money. All you can do is declare your black money under PMGKY 2016 and pay tax on this amount. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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