In India, Black money, refers to funds earned, on the black market, on which income and other taxes have not been paid. The total amount of black money deposited in foreign banks by Indians is unknown.
Another popular way to convert black money to white is by showing income in cash. Income from tuition, professional fees or commission is shown as cash by many tax payers.
A Popular method, people use to convert black money, to white, is by showing bogus loan entry. Modus operandi under this case will be people give black money to friend or relative and take a cheque from them. This is kind of bogus loan entry to convert black money to white.
In some cases people give repayment, of this loan by giving back cheque. As per recent data released by Income tax only 4.1 per cent filed income tax returns in 2015-16.
Out of 125 crore people, only 5.16 crore people actually files income tax returns in India.
As per data, actual taxpayer count is even less than 5.16 crore.
Only 1.3 crore individuals in 2013-14 paid income tax in India Only 4 per cent people of India (the world second largest country in population) pay taxes. If we check data of US 53 per cent of people pay taxes in the USA.
A black money scheme in 1975 raised Rs 241 crore and another in 1965 rustled up just Rs 29 Crore.
To break the grip of corruption and black money, the Prime Minster declared that "we have decided that the five hundred rupee and thousand rupee currency notes presently in use will no longer be legal tender from midnight tonight that is 8th November 2016. This means that these notes will not be acceptable for transactions from midnight onwards. The five hundred and thousand rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper. The rights and the interests of honest, hard-working people will be fully protected. Let me assure you that notes of one hundred, fifty, twenty, ten, five, two and one rupee and all coins will remain legal tender and will not be affected.
This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency. To minimise the difficulties of citizens in the coming days, several steps are being taken.
To avoid hardship to the genuine that PM also added the following.
1. Persons holding old notes of five hundred or one thousand rupees can deposit these notes in their bank or post office accounts from 10 November till close of banking hours on 30 December 2016 without any limit.
2. Thus you will have 50 days to deposit your notes and there is no need for panic.
3. Your money will remain yours. You need have no worry on this point.
4. After depositing your money in your account, you can draw it when you need it.
5. Keeping in mind the supply of new notes, in the first few days, there will be a limit of ten thousand rupees per day and twenty thousand rupees per week. This limit will be increased in the coming days.
6. Apart from depositing your notes in your bank account, another facility will also be there.
7. For your immediate needs, you can go to any bank, head post office or sub post office, show your identity proof like Aadhaar card, voter card, ration card, passport, PAN card or other approved proofs, and exchange your old five hundred or thousand rupee notes for new notes.
8. From 10th November till 24 November the limit for such exchange will be four thousand rupees. From 25th November till 30th December, the limit will be increased.
9. There may be some who, for some reason, are not able to deposit their old five hundred or thousand rupee notes by 30th December 2016.
10. They can go to specified offices of the Reserve Bank of India up to 31st March 2017 and deposit the notes after submitting a declaration form.
11. On 9th November and in some places on 10th November also, ATMs will not work. In the first few days, there will be a limit of two thousand rupees per day per card.
12. This will be raised to four thousand rupees later.
13. Five hundred and thousand rupee notes will not be legal tender from midnight. However for humanitarian reasons, to reduce hardship to citizens, some special arrangements have been made for the first 72 hours that is till midnight on 11th November.
14. During this period, government hospitals will continue to accept five hundred and thousand rupee notes for payment.
15. This is for the benefit of those families whose members may be unwell.
16. Pharmacies in government hospitals will also accept these notes for buying medicines with doctors' prescription.
17. For 72 hours, till midnight on 11th November, railway ticket booking counters, ticket counters of government buses and airline ticket counters at airports will accept the old notes for purchase of tickets. This is for the benefit of those who may be travelling at this time.
18. For 72 hours, five hundred and thousand rupee notes will be accepted also at Petrol, diesel and CNG gas stations authorised by public sector oil companies
19. Consumer co-operative stores authorised by State or Central Government - Milk booths authorised by State governments, Crematoria and burial grounds. These outlets will have to keep proper records of stock and collections.
20. Arrangements will be made at international airports for arriving and departing passengers who have five hundred or thousand rupee notes of not more than five thousand rupees, to exchange them for new notes or other legal tender.
21. Foreign tourists will be able to exchange foreign currency or old notes of not more than Rs 5000 into legal tender.
22. One more thing I would like to mention, I want to stress that in this entire exercise, there is no restriction of any kind on non-cash payments by cheques, demand drafts, debit or credit cards and electronic fund transfer.
In spite of all these efforts there may be temporary hardships to be faced by honest citizens. Experience tells us that ordinary citizens are always ready to make sacrifices and face difficulties for the benefit of the nation.
The Present Government has made a good beginning to end the menace of black. Still more needs to be done, like confiscation of Black Money and have an administrative set up, as an appellate authority. It should also include the assets acquired, including the property and business. It will send the right signal to the respectable thieves of India's taxes. It is the Government sparing the rod has embolden the tax evaders. It is overdue, to do it, sooner, than later.
