The Article no ways encourage taxpayers to use any of the below methods. The Article is just to let people know about what others are doing to convert their Black Monet into white money currently in India. In addition to those mentioned below there are many other methods which people use to convert their black money into white money.
CASE 1: Go to a Jeweler. Give him the amount you want to convert your cash into white. he would give you a cheque back for the same amount less 4%. He would give you a purchase bill to show that you have sold silver utensils to him. On the amount of the cheque when you file your return you will have to pay no capital gain tax as Silver utensils are Personal effects and capital gain does not arise on sale of personal effects. There you go, the money is white now!!!
CASE 2: Conversion of Black Money to White Money with the application of Sec 51 of the Income tax act, 1961.
Mr. X : A Business man who wants to convert his black money to white.
Property: Cost of Acquisition: Rs. 10 Lacs.
Mr. Y: A Salaried person who wants to convert his white money to black may be because he has to make payment in black for the property purchased by him.
Mr. X enters into an agreement with Mr. Y for the sale of property for Rs. 150 lacs with a condition that advance money of Rs. 30 lacs shall be given by Mr. Y and balance shall be paid within 3 months else advance money shall be forfeited.
Modus Operandi: Mr. Y makes payment of Rs. 30 lacs to Mr. X by way of a cheque as the advance money and Mr. X in turns gives the black money to Mr. Y of the same amount. Now, Mr. Y intentionally fails to make balance payment within the due time and the amount is forfeited by Mr. X. In this manner black money of Mr. X is converted to white money.The money is white now!!!
CASE 3: Another popular way of converting black into white money is by getting a gift from a relative. For this modus operandi, the relative must possess white money. For example, you have some black money (say Rs. 10 lacs) which you want to convert into white. You can ask your relative to gift you Rs. 10 lacs by way of cheque and you will in turn transfer your black money to him/her. Here 56(2)(vii) is not attracted as gift is received from a relative.
CASE 4:- Converting black to white by way of cheque
People also give the black money to a person (say a family member or a friend) and take a cheque from them. They show that as a loan receipt and thus they can temporarily convert their black money into white.
Then they again give them a check as a repayment of loan and receive cash which converts white to black again, but during the time the loan is outstanding, they convert their black into white, but people who do this are not aware that Section 68 on loans is applicable and you will have to prove the creditworthiness as well as the genuineness of transactions to the IT Department or else the loan receipt will be treated as income from undisclosed sources.
CASE 5: Another popular way of converting black into white money is showing income in cash like tuition income or any other professional fees.Just pay the tax at normal rate and your money is white now!!!!
Also people make investment where it is allowed to invest in cash and where the maturity is tax free for example buying an insurance policy where you are not required to show all your premiums and the maturity is tax free. For example your insurance premium is 25000/- per annum and you can pay 6000 in cheque (shown in books) and remaining in cash, people increasing the proportion of premium paid in cash increasing as and pay entire premium in white for last two years before maturity. No ITO is going to check premium of more then last two years and it is a small example. People are paying huge cash premiums everyday. In case of this small premium, the cost of investigation exceeds the benefit to the exchequer so the ITO will give a test check for at the max last two years.
DISCLAIMER
- I don’t recommend readers to follow any of these steps. I just want them to be aware regarding these false practices.
- I encourage open discussion regarding this article but advices, opinions, suggestions which may land the opinion seekers into trouble later on are not encouraged.
- I trust that a tax planning should be done in such a way that it can stand the test of the legal battle of course subject to debates.
Please note Department has started 360 Degree Profiling and keeping a Vigil on our every Transaction which made it very difficult to hide any illegal Transaction and increased Penalty for Tax Evasion and also introduced stringent provisions which may even lead a Taxpayer in Jail for Tax Evasion. We strongly advice Taxpayers to Go for Legitimate Tax Planning instead of adopting any illegal Means of Tax Saving.
(Author Email – professionalsansaar2013@gmail.com)
Republished with Amendments
Author Bio
contact me for any discussion. prince.james71@gmail.com. can help you……
@Devesh Bisht : Most of the gold jeweller buy gold in black (ie. Through illegal import of gold), by showing this purchase bill he will convert that gold as white.
For conversion contact us on – prajysh@gmail.com
Hi
In case 1 the jeweller will have excess of cash(received from custormer) and Jewellery ( for which he gave purchase bill)..what explanation will be there for excess cash and purchase of jewellery which doesnot exist in his stock.
there is many easy ways to convert your black money in white money, ping me for free advise for schedule live conversation.
send an email with your skype id.
business.live@outlook.com
thanks
Be honest and pay your taxes honestly.
What is RR Window Expo ? this is linked to ways to convert black money to white money.
i just want to know if we all knows about all kind of black money exchange why govt is quite something is fishy here i think its all is bullshit
Option 2: section 51 is plugged in this budget.
in pune many professionals are involved in converting black to white
one famous group and politicians black money is converted by professional by charging heafty fees into white within few days transaction in property.
so in india there is huge amount of black money
Please give us a option of print for article for we can download the article and read them later.
Case no. 2 is not taxable income and Agreement should be that property which assessee do not want sale for ever, Yes it is reduction in cost and if excess received from cost than it is capital receipt not taxable held in a judgement.
And when this land will not sold by assessee then what it is matter that cost is nil.
Bank branches having advance less than for Rs20 crores do not have any audit. One can do any fraud or tax evasion in such branches by opening fake accounts, purchasing cash DDs, buying gold through black money and taking gold loan in such branches and showing as loan from bank as white money.
You can have better relatonship with the staff of such branches to carry out your activity.
SOME PERSONS ARE UNDERSTANDING SOME BRANCH MANAGER OF THE BANKS AND TAKE CASH DEMAND DRAFT (DD) CORPORATION BANK CASH DD CHARGES 2.80 FOR 100 RUPEES THEY PUT DIFFERENT NAME AND TAKE A DD ADDRESS AND PHONE NUMBER IS DIFFERENT IN CHENNAI AL THE PERSONS ARE DOING THIS METHOD ONLY.
Pardon me ! Many of the comments seem to proceed on the premise / assumption that the perpetrators of such fraudulent acts would be honest enough to keep only one set of books of account and strictly follow the basic rule of ‘double entry’. Correct if wrong,- but in reality is it so; for, one has heard of ‘two’ sets of books, only one of which is for ‘white’. May be, ‘learned’ professionals know more intimately,so as to be equipped to throw light! – is that not what is commonly referred as the trick of ‘pushing under the carpet’ or have skeletons hidden- not in cupboard- but elsewhere hence none not only the taxman can be any wiser, without a forensic investigation?
Dear K. Muthu ji,
As per Section 51, the advance money forfeited by the person shall be deducted from the cost of the acquisition of the asset. Now, when Mr. X wants to sell his house in the future, the COA in such case will be NIL.
Also, the above case is supported by a supreme court judgement.
Regards
Nishant
Our laws provide avenues for growth of black money. What else you would consider the huge money held in Swiss banks.
I feel the laws instead of curbing the growth of black money, encourage by providing loopholes in them.
If I have shown income from undiaclosed sources in return amounted to Rs. 300000 and paid tax of Rs 10000, whether additional tax liability can be raised by the ITO and whether he can assess income at flat rate of 30%.
I appreciate the author, because every processional will be aware, how the black money is being converted in the white,
C A K C AGARWAL, ALLAHABAD
There are so many other way to convert the black money into white in huge amounts say 10 crores like the hawala entry operators who take cash and issue cheques for share application money/share capital by charging nominal brokerage such as 2% or 3%. However, income tax department during 2005 – 2007 has conducted huge search operations and now all the persons who have taken accommodation entries either has paid huge demands or are in the appeals before various courts. But still there are so many cases in which high courts & supreme court have held that department can only make addition in hands of hawala entry operators only and there is no tax liability, even after search operation of income tax department, on Assessee.
When you receive advance money for sale of a land and later the deal is cancelled due to which the money is forfeited, it is treated as capital receipt not taxable. However, in future whenever the property is actually sold, the advance money forfeited would be deducted from the cost of acquisition of the property involved. In this case the cost of acquisition would become 0
This advance will be treated as capital receipt against Sale of Capital asset and hence not taxavle. However the amount forfeited shall be deducted from the cost of acquisition of that Capital Asset.
Sorry this is in bad taste to plant ideas in general public mind. If the Author knows about some people doing this he should intimate this to the concerned Authorities
AS EARLIER SAID BY MR. K. MUTHU,
CASE NO. 2, require further clarification from the tax point of view, income received by Mr. X is taxable income…
Please update us on the same…
The author in case 2 of his article says that the advance of Rs.30 Lakhs received without executing the sale deed,is a means of converting Black Money into white.
How is it possible. The receipt of Rs.30 Lakhs is on account of forfeiture of advance on account of non-completion of sale and this will be treated as Income from other sources and liable to tax as any other income.
This needs clarification from the author
But the following point also needs to be kept in mind as said by SC in yhis judgement:
“Advance money or other money forfeited shall be reduced from the cost of asset & If advance money forfeited exceeds the cost, the excess shall be a Capital Receipt not taxable”
@K.MUTHU:Reply to your query.
Please refer to the case of Travancore Rubber & Tea Co. Ltd. v. CIT[2000] 243 ITR 158 (Supreme Court)
The decision givem by supreme court was that “Advance money or other money forfeited shall be Capital Receipt not taxable”
Dear k.muthu
as per the provisions of section 51 any advance money forfeited is to be reduced from the cost of acquisition. And there will be no tax implications on such capital receipts.
In case 1 , Can ITO ask assessee about source of Funds for Purchase of Silver Utensils
I agree with Mr. Muthu. A forfeiture will result as income. The IT can also call it windfall.
In this case the buyer who gave the advance should send a legal notice and also there should be a clause of arbitration. This would give a plenty of time for the seller to enjoy the money. IT guy will not be able to do anything in this case.
No, Mr.K. Muthu
Advance money forfeited is not taxable under the head other sources.
It reduce from the cost of property. Also save from this if you trasfer this property to your son.
The author is saying about converting: If the income is treated as income from other sources and liable to tax then you just need to pay income tax on that amount and so the Rs. 30 Lakhs is white.
Correct me if I am wrong.
yes. it needs clarification.
it is clear it will be taxable else
To K. Muthu
The Rs. 30 lakhs gets taxed in the hands of Mr. X.
After tax, the money becomes “clean”!!
He has already given the cash back to Mr. Y., who wanted to have the “black” money. Mr. Y shows the payment by cheque as an “expenditure”, or “loss”, if u would like!!
Pls refer HIGH COURT OF DELHI, Commissioner of Income-tax versus Meera Goyal
IT APPEAL NO. 1263 OF 2011, JANUARY 17, 2013, where it is clarified that advance amount forfeited is not taxable (ref. S.51 of the IT Act.)
Hi Mr. Muthu, Definitely conversion in case 2 would attract taxation, and when converting a huge amount into white and paying tax wont be too difficult as that would atleast help the person to have white money.
The main intention behind the transaction is to convert Black money into white, if the black money of Rs. 30 lacs is converted into white by way of forefeiture & as per IT Act it is liabe to tax as “Income from other source” then there is no harm on the part of the tax payer since now this 30 lacs is pure white money on which the assessee is going to be pay tax to govt.
huge black money came to india when vaypee said to enquire all swizz bank account,
that is the reason why all black money is invested in property by diamond,gold merchants and politicians.
during 2006 to 2007 property prices escalated take an example an agricultural land from which income earned by cultivation of crop is Rs, 50000 p.a is sold for 25 lakhs to 1 crore. huge black money is converted white due to price escalation.
i would like to inform mountains are sold in lakhs and crores.
what will happen when ramdev baba brings black money from abroad and no one is afraid of the black money lying in india.
this transaction will increase inflation and there will be social unrest and increase in crimes and poverty.
The receipt of Rs.30 Lakh on account of forfeiture of advance will be capital receipt and I believe should not be taxable as income from other sources.
To K. Muthu:
Forfeiture of advance money is a Capital Receipt and it is not taxable.
It’s good article but people may misuse it. It should not be here.
advance received for sale of plot and forfeiture is capital receipt and not revenue, so it is tax free.
Dear Sir,
Pl. avoid to commonly blame all the tax payers, in many cases this might happen but don’t forget in many cases it actually happens, and also do not forget that your article is also viewed by Income tax department, after reading this type of article they will surely consider all such transactions as bogus and genuine assesses will suffer badly, routinely department considers all assesse as fraudulent and your article will make them sure that they are absolutely correct.
Dear Muthu,
The advance of Rs 30 Lakhs would ideally be treated as a capital receipt in the hands of the recipient. The settled law is that in case of capital receipts, unless there is a specific charge in the Income-tax Act, 1961, the amount is not taxable.
In my view the forfeiture of advance cannot be treated as Income from other sources, since what is chargeable to tax under section 56 is income [as defined under section 2(24)] and the definition of income does not include such receipts.
Coming to section 45 of the Act, for an amount to be chargeable to tax as CG, the requirement is that a gain should arise on a transfer of a capital asset. In the instant case, the gain is not arising on the transfer of a capital asset, since in reality no transfer has taken place.
While the above is a case of tax avoidance, in my view, the taxability of such amount is questionable. Maybe after GAAR kicks in (1-4-2016), the income tax authorities would have a stronger footing to challange such transactions.
Regards,
Manish
surely the receipt of 30 lacs wont be taxable undeoother sources but when businessman actaully sells his property then sec 51 would b applicable on its cost of acquisition nd advance forfeited will b deducted from COA..so businessman wl have to pay LTCG on total sale consideration then…but i guess this planning can go handy if businessman doesnt intend to actually sell his property in next 6 years..afterwards in long future he can escape sec 51 while calculating his COA then…surely it will b tax avoidance and unethical but there are lesser chances of AO knowing abt receipt of 30 lacs
Hi,
In case 2 : Whatever the forfeited amount is taxable under income from other sources. He is liable to pay tax @30%.
Is there is any other option to avoid tax in that case.
As Mr.K.Muthu mentioned it should be liable to tax under other sources.
Is Mr. X going to pay taxes on the income by way of forfeited moneys? If yes, then i dont think any one will bear this much cost to convert black into white.
The other way is showing as lottery lucky draw. If it is agreed between X Pvt Ltd a company selling lottery tickets & Y a person who needs white money.
Y will get lucky draw price say 1 crore in white by paying taxes on it & in return will pay X Pvt Ltd 1 crore. This is again not practical as one has to bear tax burden under provisions of Income from other sources
The author in case 2 of his article says that the advance of Rs.30 Lakhs received without executing the sale deed,is a means of converting Black Money into white.
How is it possible. The receipt of Rs.30 Lakhs is on account of forfeiture of advance on account of non-completion of sale and this will be treated as Income from other sources and liable to tax as any other income.
This needs clarification from the author.