Explore the potential pitfalls and opportunities of the new income tax amnesty scheme. Learn how to convert black money into white without facing taxes. Understand the implications for individuals and the economy.
The government has withdrawn Rs. 2000 Note from circulation. The total value of these banknotes in circulation has declined from ₹6.73 lakh crore at its peak as on March 31, 2018 (37.3% of Notes in Circulation) to ₹3.62 lakh crore constituting only 10.8% of Notes in Circulation on March 31, 2023. It means a sum of Rs. 3.11 lakh Crore in Rs. 2000-note denomination has been hoarded outside the system by corrupt Politicians, Money Launders, Terrorists, Anti National elements, Traitors, Nations hostile to India, Naxalites, Corrupt Bureaucracy, Separatists and other Corrupt persons etc.
As per the modalities decided by the RBI, Rs.2000-notes can either be deposited in the bank account or exchanged at banks into notes of other denominations.
The SBI has issued instructions that for exchange of Rs 2000 banknotes in State Bank of India (SBI) you will not need to fill out a requisition slip. The State Bank of India today clarified that the facility of exchange of Rs 2000 denomination bank notes up to a limit of Rs 20,000 at a time will be allowed without obtaining any requisition slip.
The SBI has modified its previous instructions which required the tenderers to fill a requisition slip.
“In partial modification of instructions contained in Para 4(B), it has been decided that the facility of exchange of Rs 2000/- denomination Bank Notes to all members of the public up to a limit of Rs 20000/- at a time will be allowed without obtaining any requisition slip…,” SBI Chief General Manager (Operations) said in a letter to all circles.
Given the said modalities, the exercise of withdrawing Rs. 2000-note from the monetary system is going to provide a landmine of opportunities to corrupt persons etc. who would just walk in the bank every other 5 minutes and exchange Rs. 20000/- without the bank maintaining any record of the person who exchanged these note because of the instructions that the facility of exchange of Rs 2000 denomination bank notes up to a limit of Rs 20,000 at a time will be allowed without obtaining any requisition slip.
After the exercise is over by the end of 30th September 2023 a cool sum of Rs. 3.11 lakh Crores ( hoarded outside the system now) will be exchanged and again remain outside the system without even a Re of 1/- being levied as income tax. Of course, it would now require 3 times more space to hoard the same value.
There are nearly 130 crore Aadhaar cards issued by the government and nearly 225 crores bank accounts opened with the bank then why the government has given the opportunity of Exchanging the notes and not requiring the clients to compulsorily deposit the money in their bank accounts and then withdrawing the same, given the perception that the general public hardly have any Rs.2000-note with them which may inconvenienced them due to deposit of the same into their bank account.
Needless to say, we are once again going to witness huge corruption by many unscrupulous bankers ( as had happened during the first demonetization exercise) who would exploit the situation by offering bulk exchange services at certain percentage say 25% of the value of money to be exchanged because they would not be required to maintain any document or pass any entry in their accounts for the exchange of the currency.
Moreover we are also going to witness the exercise of hiring the services of chartered planes by corrupt persons to fly Rs. 2000-Note to the North-East region and convert the same into white money by depositing them in the bank accounts of vulnerable natives of these area who have bank accounts but no significant money in these accounts. This will be so because section 10(26) of the Income tax Act 1961 provide a great opportunity to convert the dirty money into clean money. How?
“As per section 10(26) of the Income Tax act, in the case of a member of a Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)] or in the Ladakh region of the State of Jammu and Kashmir, any income which accrues or arises to him,-
(a) from any source in the areas or States aforesaid, or
(b) by way of dividend or interest on securities;”
will be exempt from income tax. ( Section 10(26)
The N-E persons eligible to enjoy this exemption are persons staying in :
| S. No. | Member of a Scheduled Tribe staying in |
| 1 | The North Cachar Hills District. |
| 2 | The Karbi Anglong District |
| 3 | The Bodoland Territorial Areas District |
| 4 | Khasi Hills District. |
| 5 | Jaintia Hills District |
| 6 | The Garo Hills District |
| 7 | State of Arunachal Pradesh |
| 8 | State of Manipur |
| 9 | State of Mizoram, |
| 10 | State of Nagaland |
| 11 | State of Tripura |
Once the money is so deposited, it would not be difficult for the corrupt Politicians, Money Launders, Terrorists, Anti National elements, Traitors, Hostile Nations, Naxalites, Corrupt Bureaucracy, Separatists and other Corrupt persons etc. for re-chennelising the money back into circulation at no income tax.
It is advised that the government should withdraw the exemption u/s 10(26) at least for the limited period during which the scheme of Exchange of 2000-Notes i.e. upto 30-09-23 is in operation to make such deposits taxable as provided under different sections of the Income Tax Act.
It is therefore very important for the government to ask all banks who would engage in the exchange procedure to compulsorily maintain the KYC documents of the exchangers or depositors so as to avoid a bigger fraud or scam from happening. Otherwise:-
Corruption will be, at high Premium and Honesty, at a high discount.
****
Disclaimer: Views expressed are strictly personal and meant for only academic purposes and not for any professional purpose for which expert opinion may be obtained by the readers. The information given in this article has been clued from the open sources in the public domain.
Author Bio
I differ on the views directed to 10(26) issue and it is totally misleading.
yes, there is an exemption from tax u/s 10(26), but no an exemption from seeking explanations to the source of such deposits in bank. Now, for the matter, due to the extensive use of technologies, any substantial deposit has been a source of reopening u/s 147 if the explanations are to the mark and in the orders additions are made u/s 68 /69A to a large extent.
so it is wrong to say that in today’s technological era, 10(26) provides any sort of possibility to convert black to white. the transactions needs to be explained to the proper authority and are assessed based on the metirs of the case.
the credit goes to the Department for the robust system in place to which no one can escape.
Assuming there are only 50 lakh bank accountddv( population nearly 5 crore) for 10(26) eligible assessee and if any corrupt high scheming person deposits Rs. 2 lakh in each account, how much will it take? Nearly Rs. 1 lakh crores.
The source could easily be explained as out of past saving from income earned from within the States.
During last demonitization the government had declared that it would not ask for explanation in all cases where the deposit was Rs 2.5 lakh account maximum.
It all depends on what the government does want to achieve by this exercise.
In the present form of exchange without disclosure of identity,,the result would only be that if you required 1 Room for hoarding the 2000 notes, now you would require 4 Rooms to hoard the same value in 500 denomination notes.
Can you please share proof of bankers taking 25 per cent with appropriate authorities. Otherwise this will be a irresponsible allegations
So long as the facility of Exchange is available, not requiring physical deposit in the bank account, the net effect of this scheme would only be that it would now require 4 times more space to hoard the same value of money which was represented by Rs. 2000 Note.
The hoarded 2000 notes will be exchanged by Rs.500 Notes and after the exchange the Rs 500 note will again go into hoarding only requiring 4 times more space now to hoard the same value.
If the intention of the government is really to bring back the hoarded money back into the system then only Deposit of the money in the bank account is the solution, otherwise it would just be an eye wash transaction.
Dear Lalit Ji. Very true picture of the scheme announced by the Govt. As per announcement of the Prime Minister 50 Crore new bank accounts have been opened in last 9 years. Why don”t they make it compulsory to deposit in the bank accounts, It seems that the provision has been made to help the VESTED INTERESTS.
ADV KK SINGLA PATIALA 9814093274
Sirs,
Government should pass an order to Bank for depositing the 2000/- notes
1. Deposit in Bank a/c only. and or
2. Thumb Impression of depositor (As in Adhaar) must be compulsory for exchange the Notes up to 20000/- from Bank in other denomination.