Currency Demonetisation and Future course of Indian Economy

[JohnTitor]

75 cr / 50 k = 15,000 i.e One 50,000 deposit per person will need to recruit 15k folks.

Say 5 deposit per person = 5 x 50,000 = 2.5 lakhs per person will need 3k folks.

By the time 2.5 lakhs get into a drivers/clerk/worker account within 2 months especially if such person does not have the history, Reg flags will start flashing in RBI and Income tax. Even with that risk the guy will need 3000 persons to cycle through his cash hoard.

Correct. Not disputing that. But big money will find thousands of villagers for this. He might lose 50% but still might be worth it for them.

I fear that those recruited for this will get into trouble by their own making. While I would argue that they deserve it for helping the corrupt, this might have a negative impact on BJP.

Or am I over thinking this?

[Sicanta]

The case I was talking is very real and he has close to 500 employees and several others working on contract. His network is very huge. The employees are on the lower end of the spectrum requiring money for kids education, marriage etc. People are all desperate to salvage whatever possible and not the entire money

Lets hope the employees don't fall for it. They are educated and think over it thoroughly to the stress they will be subject to with all kinds of authorities coming knocking on their door. The financier will hang them out to dry in such cases.

[pankajs]

Distributing money as loans wont help. It has to be recycled through a bank to get new currency in place of the old.

Over the counter exchange is Rs 2000-4000 per day fro the next 15 days. Beyond that the limit will be expanded but yet to be fixed. So that path is not viable for 75 cr. It has to be done as deposit.

Lets say he gets 3000 folks to do this for him. Even if ONE such person falls into the Income tax net, the game for this politico is over. So now instead of a single point of failure (himself) the politico has 3000 points of Failure. Hows that for risk.

[Sicanta]

Viv ji, I too have hardly any cash on me. But there are plenty of options available. Bought on the necessaties required from spencer and paid through card. Paytm was also available at the store.

Plus i have to deposit the demonetized notes on me in the bank. Will take an hour tops.

[hanumadu]

75 cr / 50 k = 15,000 i.e One 50,000 deposit per person will need to recruit 15k folks.

Say 5 deposit per person = 5 x 50,000 = 2.5 lakhs per person will need 3k folks.

By the time 2.5 lakhs get into a drivers/clerk/worker account within 2 months especially if such person does not have the history, Reg flags will start flashing in RBI and Income tax. Even with that risk the guy will need 3000 persons to cycle through his cash hoard.

The thinking on the part of the BM holders may be that there's no harm in trying. If IT detects it and takes its cut, so be it. It will still be better than losing all of it.
What does the black money bill say about the money found after the amnesty is over? What is the tax rate? And is there a prison term?

I think people who think there are no consequences are in for a nasty surprise. Many will lose 100% of their BM and a prison term too.

Alarm bells are already sounding

http://www.business-standard.com/articl ... 404_1.html
Deposit money in bank only if you can account for it: Tax experts
Penalty for unaccounted income could range from 50% to 200% of evaded tax

If you are one with a hoard of cash in your hand, you should deposit that in banks only if you are able to account for the source of income, says tax experts. Depositing unaccounted money into banks would open up one to scrutiny by the income-tax (I-T) department, though some consultants said it might be worth a chance.

[Sicanta]

Distributing money as loans wont help. It has to be recycled through a bank to get new currency in place of the old.

Over the counter exchange is Rs 2000-4000 per day fro the next 15 days. Beyond that the limit will be expanded but yet to be fixed. So that path is not viable for 75 cr. It has to be done as deposit.

Lets say he gets 3000 folks to do this for him. Even if ONE such person falls into the Income tax net, the game for this politico is over. So now instead of a single point of failure (himself) the politico has 3000 points of Failure. Hows that for risk.

They will have to employ ben affleck's character from the accountant to stand any chance of success.

[pankajs]

Tax is from 50% to 200% per ET article. Not sure about prosecution.

[Sicanta]

Should have made use of ids while it was available from june to september.

[Sridhar K]

Part of the problem with his employees are that they have average education and lower middle class quite a gullible category. The guy is well connected and very deeply influential.

[saip]

the embedded GPS forwards is a rumour that must be spread as much as we can.I dont see any harm from it.
On the contrary, a lot of unsuspecting people will fall for it and just might avoid stashing cash in fear of a satellite tracking it

Useful rumour

And then they may buy my invention too. I am rich!!!

[sanjayc]

Govt to get report of all cash deposited in bank accounts above limit of Rs 2.5 lakh during 50-day window.

(Revenue Secretary)

[hanumadu]

Part of the problem with his employees are that they have average education and lower middle class quite a gullible category. The guy is well connected and very deeply influential.

Namo is no fool. He will not harass the small people. He will find the big fish behind it. Heck the 2000 Re bills may even be bait for such people.

[pankajs]

^
I did not read that news but my guess was that the moment cash deposit reached around the taxable income limit the GOI would immediately become interested.

If GOI has declared the limit as 2.5 lakhs my guess is that anything above 1 lakh cumulative will be given a quick automates scan. Otherwise folks may game the system. Perhaps the announcement was to test folks trying to game the system trying to keep deposit up to 2.4 lakhs.

[Karthik S]

Tajinder Pal S Bagga ‏@TajinderBagga
Tax plus penalty of 200% will be levied on cash deposited in bank accounts but not matching with income declared: Revenue Secy.

[JohnTitor]

Can you buy say 10 cars with back dated receipts and sell them over time?

Again, playing devils advocate to understand if there are any loopholes. I'm sure NM has thought of them but this is for my understanding. I also want to be armed with this knowledge when discussions with secular people.. Some have already said this won't help people but make their life worse.

[pankajs]

So now declare and pay double of what you have or watch your money turn into toilet paper. How very interesting.

[Sicanta]

Part of the problem with his employees are that they have average education and lower middle class quite a gullible category. The guy is well connected and very deeply influential.

Namo is no fool. He will not harass the small people. He will find the big fish behind it. Heck the 2000 Re bills may even be bait for such people.

He is not but still these people may be asked to point out the real source and become party to any future litigation.

[Akshay D]

If I remember correctly from yesterday's presser (Not PM's address) RBI is to print and release limited # of Rs. 2000 notes. 1000 notes were ~40% of all notes in circulation. So the issue of mobility and logistics will be solved to a degree by the new notes.

[pankajs]

Can you buy say 10 cars with back dated receipts and sell them over time?

Again, playing devils advocate to understand if there are any loopholes. I'm sure NM has thought of them but this is for my understanding. I also want to be armed with this knowledge when discussions with secular people.. Some have already said this won't help people but make their life worse.

Those kinds of expenditure is already watched. Not sure about th reporting requirements but there must be some ERP kind of package that ties the dealers to the manufacturers. This is not atta or daal. Not sure but if dealerships are on manufacturers ERP the it is not possible without their collusion.

[hanumadu]

From the link posted before.

According to experts, the highest marginal rate would work out to around 35%. Further, any unaccounted income would attract penalty under Section 270A of the Act, which can range from 50- 200% of evaded tax. The tax defaulter could also attract prosecution under Section 276C of the Act, with imprisonment from three months to seven years with fine.

The penalty rate was revised from 100% to 300% in the last Budget to reduce litigation from assessees. However, the penalty for misreporting income was doubled to 200%. The 50% penalty will be levied in cases of under-reported income, while 200% in case of misreporting income.

“The penalty will be based on a case-by-case basis. Initially, those sitting on unaccounted cash can just deposit the amount in bank and pay the tax incidence, say 30%. The I-T department, based on the available information, will look at these on a case-by-case basis,” said a senior finance ministry official.

Some consultants feel that for such assessees, penalty will arise when it comes to the notice of the I-T department.

One could also appeal to tax authorities for taking a lenient view and keep the penalties at the minimum, said a Mumbai-based tax consultant.

However, some tax experts feel any move to bring unaccounted for income into the fold of the banking system would be an unwise one as it will open up the assessee to scrutiny of income sources of previous years. “Why would you open the Pandora’s box for yourself?” asked a Delhi-based chartered accountant.

Tax experts said most of their clients were in a tizzy to figure out ways to suitably dispose of cash in hand.

[hanumadu]

Can you buy say 10 cars with back dated receipts and sell them over time?

Again, playing devils advocate to understand if there are any loopholes. I'm sure NM has thought of them but this is for my understanding. I also want to be armed with this knowledge when discussions with secular people.. Some have already said this won't help people but make their life worse.

But you will have to provide your ID/PAN/Aadhar and all such transactions will be traced back to you. Its not very different from making a large deposit.

[pankajs]

I am sure that even while bhaiwood/Industry is praising Modi they are trying to figure out their own cash situation. Such is the hit that they cannot do anything except sing his praise while trying to hide their pain. Jai ho.

[hanumadu]

So now declare and pay double of what you have or watch your money turn into toilet paper. How very interesting.

Pay double and face prosecution too. Tax advisers are not recommending to declare unaccounted income except of course idiots. It will be fun to see them face their clients after they go to prison.

[LokeshC]

I am sure that even while bhaiwood/Industry is praising Modi they are trying to figure out their own cash situation. Such is the hit that they cannot do anything except sing his praise while trying to hide their pain. Jai ho.

Thief bitten by a scorpion analogy applies here.

[KarthikSan]

Can you buy say 10 cars with back dated receipts and sell them over time?

Again, playing devils advocate to understand if there are any loopholes. I'm sure NM has thought of them but this is for my understanding. I also want to be armed with this knowledge when discussions with secular people.. Some have already said this won't help people but make their life worse.

Even if the dealer is willing to invoice at a back date, he still cannot release the car to the owner without a temp registration at the least. They ask for PAN/AADHAR/Ration Card ityadi for that as well. Plus it will be a huge black flag if you register 10 cars now but they were invoiced weeks ago. Self incriminating but I'm sure a few dumb Congis and Kazhaga Kanmanis will try it by arm twisting the local RTO.

[ShauryaT]

One of my friends works for a real estate company owned by a benami of a famous politician. His boss has notified all his staff about Rs 75 Cr in cash that needs to be converted to white. He will distribute this as loan to employees who will help them in converting to white. If this is what he is disclosing to employees, imagine the actual worth.

Exactly what I had said the politicians would do. But it will not be too difficult to flag all such deposits and go after the source. I am hopeful NaMo will take care of all such cases.

Hope Namo is not this stupid to spite the masses and the millions of small business owners, where black money is a "system" to avoid taxes from governments usually corrupt local, state and central.

If all he does is goes after these big political black money, from a monetary perspective it is only a tip of the iceberg and not the real issue. The real issue from hereon is critical economic, administrative and labor reforms that convinces the masses most impacted that this change is to their benefit.

It is not going to be easy to change this culture of cash. This is a bold step but remember the biggest impact is on a support base the BJP banks on - the banias. If they are not convinced and provided with some carrots - this base will payback in coin.

If the argument is, the government already had the disclosure scheme - then Jaitley does not get it. The banias DO NOT trust the government with their money. What we have is decades of mistrust of ANY government driven heavy system. The carrots have to be on a different order. To allow this money to be felt safe, to be channeled for investments, to be rewarded for transparency and ensure that there is NO persecution and violators are dealt with fairly and squarely, without treating them like criminals. A message has to go that the government is not just looking to increase its own treasure but is seeking a better utilization of this capital.

I am not referring the black money of corrupt officials and politicians or people involved in illicit trade but the vast majority of banias upon which most of our country stands on. Great bold move - now it is time for reforms 2.0 and beyond.

Caveat Modi.

[Primus]

One of the biggest changes this will bring about is the importance of the 'business man' in society.

Growing up in the 60s and 70s, even highly placed salaried people never did as well as the smallest of business owners. This gap continued to widen thanks to tax evasion and black money. I watched relatives who were lower-middle class around Independence (as per family lore) gradually get richer and richer while even the loftiest government or private employees remained where they had always been. It did not bother anyone that the business-man never paid any taxes and had plenty of money to buy up huge properties, which of course filled up their coffers even more. That these people were high-school dropouts or at best token 'BA Pass' while the salaried guy had graduated from the top university made the pill even harder to swallow.

I have relatives who owned factories and were forever looking to 'hook up' with corrupt babus and netas who would get them tenders and push their products. One even went to the extent of marrying his daughter to an IAS man hoping for great returns on his 'investment'. Imagine his disappointment when son-in-law turned out to be a truly honest person!

All of that has changed. The playing field is now level. You run a business (like I do here), you pay tax on every penny you earn and if you are good at what you do you will make it. The competition is fair and thus much more palatable to all.

poppycock,
Businessmen flourished, because there was business. Because the salaried class were scared to invest money and take risk. I can understand the need to fight against corruption and fake notes, but to have one converted to communist tendencies is nothing but 'jealousy'

Yeah, right. Jealousy indeed! Perhaps you didn't grow up in the 60s then, even the local aloo-chat fellow, operating from a shop that was less than 20 sq ft made more money than a graduate from IIT in a private firm. People who sold oil, food grains and such happily adulterated the merchandise, paid hafta or whatever to local law-enforcement, did not pay the due taxes and the cycle continued. Business flourished not just because there was business, but mainly because there was black marketing, tax evasion and other forms of profiteering. It applied not just to traders and shopkeepers, but also those who had 'white collar' businesses such as doctors, lawyers and CAs. Anybody who dealt in cash profited.

That story is over now. As per a close relative in India who is in one of the categories above, there is severe panic on the streets and many have 'lost everything'.

FWIW, I am the last person to promote any kind of 'communist tendencies', far from it.

[manju]

I had joint property (2000 sft empty plot) outskirts of metropolitan city.. valued around 20 lacks.. My brother and I were joint owners.. We felt it was risky having the plot in a metropolitan city and so..
- Purchased an acre plot for 20 lacs in a smaller town.. to be developed into plots.. in anticipation of selling the 2000 sft in metropolitan city.
- Now we are caught in a situation where the 2000 sft will probably sell for less than 20 lac.. may loose money (however, am happy keeping the big picture in mind)..

Want some tips here and comments on this idea..

- Was hoping that there will be folks with money who would want to get rid of their 500s and 1000s.. would it make sense for them to buy my property at the 20 lac price if I am willing to accept their 500s and 1000s.

- My incomes has all been white and I can easily account for this 20 lac in my account..

any comments welcome..

[manju]

As per jokes circulated in twitter... women who have hidden are surrendering their hidden money to their husbands... so did mine today.. 6 lacs ...

plan to deposit it in bank.. have mainly income from abroad.. all accounted for. Hope I should not have any issues.

[Sicanta]

Rev Sec - Cash deposits of jewelers will be scrutinized against sales made to check whether they have taken pan no of buyers or not.

[Sicanta]

^^ the georgi zhukov move has now been unveiled...

http://timesofindia.indiatimes.com/indi ... n=referral


NEW DELHI: The government on Wednesday warned that cash deposits above Rs 2.5 lakh threshold under the 50-day window could attract tax plus a 200 per cent penalty in case of income mismatch.

"We would be getting reports of all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account.

"The (tax) department would do matching of this with income returns filed by the depositors. And suitable action may follow," revenue secretary Hashmukh Adhia said tonight.

Any mismatch with income declared by the account holder will be treated as a case of tax evasion.

"This would be treated as a case of tax evasion and the tax amount plus a penalty of 200 per cent of the tax payable would be levied as per the Section 270(A) of the Income Tax Act," he said.

The government has allowed citizens to deposit in their bank accounts old currency of Rs 500 and Rs 1,000 denominations, which had been declared invalid in the nation's biggest crackdown on blackmoney, corruption and counterfeit notes, between November 10 and December 30.

Adhia said small businessmen, housewives, artisans and workers who had some cash lying as their savings at home should not be worried about any tax department scrutiny.

Such group of people... need not worry about such small amount of deposits up to Rs 1.5 or 2 lakh since it would be below the taxable income. There will be no harassment by the Income Tax Department for such small deposits made," he said.


On people resorting to buying of jewelery, he said persons buying jewelery has to provide the PAN number.

"We are issuing instructions to the field authorities to check with all the jewellers to ensure this requirement is not compromised.

"Action will be taken against those jewellers who fail to take PAN numbers from such buyers. When the cash deposits of the jewellers would be scrutinised against the sales made, whether they have taken the PAN number of the buyer or not will also be checked," he added.

[KarthikSan]

And here it comes. From the language it seems this guy is a PAAPi/Congoon

http://www.thehindu.com/news/national/d ... epage=true

A petition was filed in the Supreme Court on Wednesday seeking a judicial order quashing the government’s decision to “immediately discontinue” the circulation of Rs. 500 and Rs. 1,000 currency notes and give the poor a reasonable opportunity to organise their lives.

The writ petition filed by Supreme Court advocate Sangam Lal Pandey is likely to be mentioned for an early hearing.

The scrapping of the high-denomination currency was implemented from November 8-9 midnight after Prime Minister Narendra Modi said the government was constrained to take this measure to fight the black money menace.

Mr. Pandey’s petition terms the announcement a “Tughlaki Farman” — a term fashioned after the medieval Indian ruler Mohammed bin Tughlaq whose decisions to change the capital from Delhi and currency had boomeranged.

The petition sought to “quash this illegal and arbitrary announcement without giving any opportunity to the poor citizens of India.”

Alternative arrangements

It has asked the apex court to direct the government “to provide a stipulated time to citizens for making alternative arrangements for necessary activities, may it be medical, educational, weddings, farming, etc.”

Mr. Pandey, who is a party in person, claimed to have received information that several private hospitals have refused to take payment in cash. This may delay “serious operations,” he said.

He said thousands of weddings scheduled from November 9 to 11 might have to be cancelled.

“A large number of people are suffering,” the petition said.

[hanumadu]

Rev Sec - Cash deposits of jewelers will be scrutinized against sales made to check whether they have taken pan no of buyers or not.

Almost hinting/threatening that its a wiser choice to forfeit the money than try to salvage it. And also not to make any back dated sales or sales without proper documentation.

[Sicanta]

Given the overwhelming support this step has recieved from public, the judiciary will have be brave to wade into these waters. Will seriously undermine themselves if public sees them standing with the corrupt. In fact it may provide an opportunity to finally reign in the judiciary.

[shynee]

shshshsh... Don't call it hoax. Let people believe in it. So there won't be a clamor for the Rs 2000 notes

Hoax. Jetli laughed it off in his press conference.

[hanumadu]

As per jokes circulated in twitter... women who have hidden are surrendering their hidden money to their husbands... so did mine today.. 6 lacs ...

plan to deposit it in bank.. have mainly income from abroad.. all accounted for. Hope I should not have any issues.

That's the highest I have heard so far among the income declared by wives to their husbands since yesterday.

[KarthikSan]

shshshsh... Don't call it hoax. Let people believe in it. So there won't be a clamor for the Rs 2000 notes

Maybe there really is a chip and Jet Lee wants people to believe it's a hoax

[Sicanta]

As someone already mentioned, keeping more than 10 lakh in cash is illegal

https://twitter.com/BTVI/status/796402737659293697

[pankajs]

Rev Sec - Cash deposits of jewelers will be scrutinized against sales made to check whether they have taken pan no of buyers or not.

Almost hinting/threatening that its a wiser choice to forfeit the money than try to salvage it. And also not to make any back dated sales or sales without proper documentation.

Yes seems like it. That could be because the deposit/tax path *could* involve litigation/bribery/etc. If 100% of the black money simply disappears from the system then GOI in effect would collect 100% as tax with much less hassle. Smart!

[Chandragupta]

Im all praise for this step. Nodoubt much needed chemo for Indian economy. But I hope he is not targeting the small and medium business owners. Many people including my own family, friends and business colleagues have 20-75 lakh in form of safety net cash from sale of property, deposited in bank lockers for a rainy day or marriage or buying house for children. They are all in a panic. These are not criminals, not connected to politicians, just regular people mostly BJP supporters who go about doing their businesses. Now with 200% penalty, prosecution and what not, what will these guys do?

There are plenty of big fish to be cought but dragging in sme owners will just kill off small scale industry. Bring them inside the tax net but why treat them like criminals?