31 lakh crores, the money which is circulating in India today, but this money is nothing the much bigger amount in circulating in our country in the name of black money! 8 November 2016, 500-1000 rupee notes are demonetized but why was this step taken? Simple, to reduce the black money and fake notes in our country. But the question is.
Did it really happen? Because the reality is black money was reduced because of demonetization but it happened on a very small level. But wait, how can it happen? Because this one thing had shaken the whole country. So see, the truth is people had kept only a small portion of black money in the form of cash. And the people who had cash.
Were destroying it. But over the years, when Pandora papers got leaked it had clearly proved that India is actually having black money problem. Infact, out of the most money circulating in our economy a big portion comes from just black money. But how to know whether money is black or white? And how does this black money circulate in our economy? So for example, there are two people – Karan and Arjun.
Karan is an honest person. He declares his income to the government. He shows the government, how much money he has earned! And when he pays taxes, the left over money is Karan’s white money income. Whereas Arjun doesn’t declare his income to the government. When he doesn’t declare, he doesn’t pay taxes. The money Arjun has now.
All that money is black. Now there is a catch over here. Whatever the black money Arjun has earned one of these two cases can happen in it. Either Arjun had made this money from illegal activities. Like, suppose he has done any illegal activity drugs, corruption or whatever. Or he has made this whole money legally but he hasn’t declare his income.
Suppose, Arjun runs a grocery store where he makes 5 lakh rupees as profit. That is 60 lakhs profit per year. Here, if Arjun puts this whole money in the bank then government will know his income. So Arjun doesn’t put this money in the bank rather he keeps whole money in the form of cash. But the catch is 50-60 lakh rupees Arjun has in the form of cash.
How would Arjun use this money? Have to make this money white. So this is how it is done. If Arjun has to utilize these 50-60 lakhs money now Arjun would buy a house worth 1 crore. For suppose, he purchased a house from a person named Vijay. And that too in 1 crore rupees. So Arjun would give 50% amount by cheque and rest 50% money by cash.
So technically, in this scenario the house of that price is just 50 lakhs on paper. But Arjun has paid 1 crore rupees for that house in which he has made an adjustment of 50 lakh rupees. Which is not noticed by government or other people. But there is one more scenario arises in this condition. That is, the 50 lakh rupees Vijay has when he has sold his house what would he do with these 50 lakh rupees?.
Because this whole money is black. Very simple. He would convert this money in white money. How? Through these three ways. No. 1 – Investment. See, Vijay will use this whole amount for portfolio management services. Suppose, he gave the money to his friend named Ajay. He paid only that much money.
Which can be adjusted within his taxable income. After this, Ajay would do one thing named ‘arrangement’. The amount of 50 lakh rupees Vijay had he gave this amount to a pool of investors in small amounts. These investors would invest money in a particular stock. After that, they will pump the stock price, the stock price would start going high. And they will wait. After that when they would sell the stock,.
They would have to give long term capital gains, not short term capital gains. And long term capital gains are comparatively low. After one year, when they would sell off the stocks the money that would come after paying tax would be white. Technically, by giving 50 lakhs to these pool of investors he increased his money by investing money in the stock market from those people. and also got the money white.
Apart from this, Vijay can invest upto 5 lakhs in 10 years insurance scheme. The first premium of 50k, he can pay that through cheque, but he can settle down rest premiums in cash. So Vijay got the white money by moving the black money in another market. And a lot of people do this. This was revealed in a sting operation in 2013 that the executives of HDFC, ICICI and Axis banks helps many reports in money laundering. And this was being done through Indian Banking system.
The problem of black money in India seems small, but actually this is very big problem. And if you want to understand this problem very deeply then you can listen this audiobook ‘Black Money’ on KukuFM. Alongwith that, you would get more than 10k audiobooks and shows on KukuFM app through which you can increase your knowledge by listening in easy Hindi language. And we have shifted from books to e-books, but that increases our screen-time,.
But audiobooks helps you to decrease your screentime. If I talk about my personal favorite audiobook then my personal favorite is ‘Doglapan’ by Ashneer Grover, which taught me such things about businesses which I don’t get anywhere else. You will get the app link in description and comment box. And if you use my coupon code ADI50 then you will get 50% off on your first month subscription, that is, you can get it in just 49 rupees.
So if you find it valuable, then you can definitely checkout KukuFM app. I’ve put the link in description and comment box for you. Now let’s come to the next level of money laundering, where shell companies enter. Infact, recently Vinod Adani, brother of Gautam Adani his name came in the ownership of many shell companies. Shell company is a company with no actual business.
These companies exist on papers only. And these companies are opened in those countries where the taxes are almost NIL. And through these shell companies the process of making the black money white is called Round-tripping. Now how all this happens? So see, I have a company named Open Media. And we are doing great business. Suppose we made a profit of 20 lakhs this month. And now I would open my shell companies in Cayman Island, a tax saving country.
For suppose, with the name Aditya Ltd. Now 10 lakhs out of these 20 lakhs is white money. But I want to show 10 lakhs as black money and want to it aside in the name of black money. So in this scenario, I would transfer 10 lakh rupees in Aditya Ltd. And artificially, I would show many assets that Aditya ltd. has purchased a lot of assets. Now, out of 20 lakhs, 10 lakhs has gone.
Now 10 lakhs are left. And there would be high tax on this amount. Now I would transfer 7 lakhs more in Aditya ltd. in the name of patent fee, client or a loan. Anyhow I will move this amount to Aditya ltd. So technically, Open Media has just 3 lakh profit now. Open Media has diverted the rest money. Now I hardly have to pay any tax above Rs.3 lakhs. And this is how.
The black money is converted into white money through round-tripping by using the shell companies and tax is also not given. Now suppose, there is a person named Dhirav and he has made a lot of money. But if Dhirav keeps this money in his bank account then authorities would come to know that he has lot of money. And he would have to pay tax. So what would Dhirav do?.
Simple. Here Dhirav would use various players and would use a technique named ‘Smurfing’. It’s very simple. He would transfer this whole amount in the accounts of many people. And those people would transfer this amount in the offshore bank account of Dhirav. Where no one checks that where the money has come from. Now Dhirav can purchase any asset by using the money in offshore account, in any country where tax laws are very open.
But do you know, the maximum money of our country is invested in just real estate. But why? And if this is happening then how does it happen? In year 2012, in a village named ‘Ulwe’ near Mumbai, where there is no proper electrification there people were given a 2BHK flat worth 50 lakhs. And some of developers said that.
They would take 30% amount in cash only. Not just that recently the income tax department of Delhi had raided a real estate group. Where it came to the fore that deals worth more than 3k crores has been done in it. But wait, why do the real estate builders have so much white money? Well, because of these three reasons. First of all, whenever a buyer is purchasing his house.
He try to adjust their black money in these real estate deals. Why? Because the value on registry is the real value for the government. And the rest money is given as black money. Its benefit is that because a lot of money is given as black money in this scenario the developer gives some discount and the person who has black money, saves his tax. Second reason,.
Whenever the value of property would be shown less on paper but the actual value would be much higher then the whole black money that is adjusted the developer won’t have to pay that money as tax to the government. The income of developer would be shown less, and he would be able to save his tax. And third reason, this black money creates a huge bubble in real estate market. Due to which the prices of real estate go high speedily.
And developers make profit. But wait, the black money which developers keep what do they do with that money? Well, to understand that first we have to understand that how black money is used in politics? So see, when developers make any project they have to purchase a lot of land. And in most of the cases, that land is in the hands of the government.
Due to which they need a lot of permissions from authorities and also need approval of ministers. For which, bidding happens among builders that who will get the land. And bribes are given wherever bidding happens. But the thing is banks don’t offer any loan for those bribes. So all money that is given to authorities and minister as bribe all this is given in black money. But the interesting thing is.
The more bribe is given in land acquisitions and permission for project the more expensive that project becomes. That’s why you see, the prices of real estate has increased a lot. Those prices haven’t increased because of that reason, they has increased because of the bribe given to acquire that land. Moreover, to take benefit of this chance, politicians give a lot of money in the hands of builders and ask them to give properties in return which would be registered on the name of various family members.
And not just that black money has a major role in the funding of political parties. Under Section 29C in the Representation of the People Act, 1951 if any political party is taking any donations which exceeds 20k rupees then they have to show where this amount has come from! That’s why most of the parties get the money from many people in small amount. The reality is, in most of the cases.
This money is businessman and political leaders. Which they bring as white money in the form of cash in party fund through unnamed sources. And a lot of black money of these politicians and businessmen is used to buy votes during elections. And again, these all payments are done in cash. By using which, the party keeps its power maintained. And it helps them to win elections. Gujarat hawala operation in 2017 clearly shows that.
That how these politicians transfer illegal funds in their party and people don’t come to know about it. But the question is, who is on the looser side? At the end, who has to bear all these problems? Common people like you and me. Because see, when black money increases in economy then transactions in white money decrease due to which the government get less tax,.
And when the government has less money, then how would it invest money for the development? And when it happens then corruption, crime, tax and inflation increase. And it affects the pockets of common people like you and me. Now I know what you are thinking. If we have such a huge knowledge about black money then why don’t government do something? Actually the biggest problem of black money is that it is unaccounted.
That’s why the government don’t know where the whole money is. And how much the white money is and how much the black money is. In year 2016, when the government introduced black money they thought that it would end black money. But it didn’t happen. And the demonetization impacted very less even people didn’t care about it the huge amount of black money exists in our country.
Government always tries to keep black money as low as possible. And the money can be invested in economic development as much as possible. That is the reason, that our government is putting so much efforts on cashless economy. The logic is very simple. When there would be no money in the pocket of people then the unaccounted money can’t exist. Whole money would be accounted with digital trails. The government would have knowledge.
That how much money exist in the economy. And the black money would decrease a lot. And due to this, the tax revenue of government would increase a lot. Due to which the chances of economic development increase a lot. And according to the Government’s white paper on black money the problem can only be solved when the state and central departments would work together. Like Central Board for Direct Taxes, Financial Intelligence Unit.
CBI, Serious Fraud Investigation Office when all these people work together then the problem of black money can be solved. But the truth is, today India is facing such a big problem of black money. And this can affect the life of common people like you and me! If you want to understand this problem more deeply, then you can listen this audiobook ‘Decoding blackmoney’ on KukuFM, I’ve put the link in description and comment box for you!.
And if you use my coupon code ADI50 then you would get the discount of 50% on first month subscription. That is, you can get it in just 49 rupees. But there is a very big question, and that is, is betting legal in India? And if not, then why are betting companies like Dream11 able to operate so easily in India? Who controls this whole betting mafia? And most importantly,.
Why is our government making it legal like UK and US? If you want to know the answers of all these questions then watch this video on the right!
