Currency Demonetisation and Future course of Indian Economy

Rishi Verma · Post by **Rishi Verma** » 09 Nov 2016 23:21

Just returned from a ride around town talking to various people. Then went to this high end gym owned by a corrupt family.

Some tidbits:
People on ground (petrol pump attendants, vegetable sellers, security guards, gym coaches had a big smile on their faces)

Rich corrupt gym members didn't come today (gym was deserted),

ATM nooks were shuttered (great sight to see)

Petrol pumps had big lines

Supermarkets were largely empty

Eerie silence on roads

pankajs · Post by **pankajs** » 09 Nov 2016 23:24

^
Initial 30% wonlee but a later scrutiny and decision on case to case basis. But it is risky to go down that path to be tripped by the later scrutiny.

saip · Post by **saip** » 09 Nov 2016 23:25

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

No. It is the tax they are talking about not the money. So if you have Ten Lakhs and the normal tax is 30% on it, yoy MAY be assessed the tax (30%) + penalty from 15% to 60%.

Viv S · Post by **Viv S** » 09 Nov 2016 23:28

manju wrote:- 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..

If you can account for more money than you possess, you're in a position of power in the market (along with other cash businesses such as eateries). You could sell off your property for 40 lacs (with 20 as the cheque amount) By late Dec the conversion rate will probably be down to 5 old notes for 1 new one.

Problem you'll face is with the registration aspect. You can back date your receipts for the money, but your application with the registrar OTOH cannot be backdated. That's when the transaction is deemed to have occurred AFAIK and that's where the taxman might have an issue with it.

I'd suggest you repost your query in the Real Estate thread (and seek some expert advice).

kmkraoind · Post by **kmkraoind** » 09 Nov 2016 23:35

Demonetisation: Deposits above Rs 10 lakh to be presumed as cases of tax evasion - Moneycontrol

The clarification also said that the government will get report of cash deposits above Rs 2.5 lakh which are made between November 10 to December 30.

Deposits made above Rs 10 lakh are to be treated as cases of tax evasion and along with imposing tax an additional penalty of 200 percent will be levied on deposits that don't match their tax declarations.

Deposit of Rs. 2.5 lakhs will be yellow flagged and deposits above Rs. 10 lakhs will be red flagged. Good luck to 75 crore black money owner who now needs and has to manage at least 22,500+ (+ because the person has to deposit Rs. 2,49,999 to evade the IT radars) people to launder his money.

shravanp · Post by **shravanp** » 09 Nov 2016 23:38

A friend of mine has measly Rs 20 Lakhs and is contemplating whether to deposit and incur 200% penalty or simply burn it.

SRoy · Post by **SRoy** » 09 Nov 2016 23:40

^^

20-75 Lakhs in cash are not big fishes. True.
They are not small fishes either.

Offer them your sympathies. 10 Lakh plus deposits are treatable as tax evasions.

Keeping such sums in lockers instead of accounts (foregoing interests ???? ) means either idiocy or malicious intent. Or maybe both.

Suraj · Post by **Suraj** » 09 Nov 2016 23:42

JohnTitor wrote:^^ but if they divide the amount to a large enough group, can it not be done?

Playing devils advocate here, not trolling.

When those people show up at a bank to deposit it, they'll be asked the source of the income - their KYC/PAN data will be crosschecked and flagged. That's the whole purpose of this exercise from the front end. The 'find enough people who can make small enough deposits' is a reductio ad absurdum argument. This isn't an exercise in trying to figure out the most outlandish possible ways this trap could be circumvented. YOU have to express the costs involved in such an argument. Anyone unloading in such a manner needs to find enough suckers to do it through, who are also willing to take the IT man's bullet if they're audited.

On the back end, GoI achieves multiple things in one shot:
* immediate recapitalization of banks to the tune of several lakh crores, at a time when banks are still under great stress due to the UPA era resource misallocation.
* substantial deflationary input into the economy, by sucking out black liquidity that competes with white money everywhere.
* control over monetary and rate policy, since a large parallel economy was immune to official rate and liquidity adjustment movements.

The most important thing is that significant amounts of currency come back into the government's control . It dramatically improves GoI's abilities, stocking them with a massive deposit infusion (note, there's a withdrawal limit, but a larger or no deposit limit) recapitalizing the entire financial system. It also lets them control monetary policy that much better, because 'the cash is back in the bank' .

kmkraoind · Post by **kmkraoind** » 09 Nov 2016 23:43

shravanp wrote:A friend of mine has measly Rs 20 Lakhs and is contemplating whether to deposit and incur 200% penalty or simply burn it.

First is his choice, but ask him not to burn it (Lakshmi). Ask him to drop that in a Temple Hundi or go to a Govt hospital, enter a ward, keep a bundle of cash on every bed. There will be tears and tons of silent and overt blessings (will earn some good karma for his account).

Rishi Verma · Post by **Rishi Verma** » 09 Nov 2016 23:43

shravanp wrote:A friend of mine has measly Rs 20 Lakhs and is contemplating whether to deposit and incur 200% penalty or simply burn it.

Due to smog issue please advice him not to burn it. It's biodegradable and can be composted.

Suraj · Post by **Suraj** » 09 Nov 2016 23:56

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

It does not matter! The dealer will have to deposit the money, and when they do, they'll be asked who bought 10 cars. Since they all had to record your PAN/Adhaar, the IT man knows that 10 cars were bought by one PAN. And then the enforcement directorate knocks on your door... (and in this case I say 'you' generally, not specifically claiming you are a criminal)

Look, fundamentally these Rs.500 and Rs.1000 notes are ticking time bombs you're holding. You need to stop coming up with fanciful ideas of 'how about if I hand over the timebomb in XYZ manner ?' . You need to demonstrate that there are enough gullible suckers who'll take hold of this time bomb, and not point the finger back at you when the IT man asks them where they got it.

Ultimately *someone* will have to deposit it, and that someone is on the hook to explain it. The 'find sufficiently large number' of people is ridiculous because that's just more people who will squeal on you because they need only a mild prodding from the IT people to give you up, because they're risking a lot for very little cash.

People keep coming up with creative 'what if I get rid of cash in this manner ?' It's not other people's business to work through the entire chain of logic - you have to explain why the IT man can't trace it back to you. When you come up with such ideas, please start by remembering that in the hypothetical argument, you're the guy with the bomb ticking on your lap. Start by showing that a) anyone will take it and b) when squeezed by the IT man, they won't point back at you. Just claiming 'ok I got rid if it in XYZ way, am I safe ?' isn't enough.

Chandragupta · Post by **Chandragupta** » 10 Nov 2016 00:03

SRoy wrote:^^

20-75 Lakhs in cash are not big fishes. True.
They are not small fishes either.

Offer them your sympathies. 10 Lakh plus deposits are treatable as tax evasions.

Keeping such sums in lockers instead of accounts (foregoing interests ???? ) means either idiocy or malicious intent. Or maybe both.

Lol @ malicious intent. No, all RE deals in India are 20-80 white:black or near about. This is the way it happens. So you dont deposit the 80% into your account, you either reinvest it in re or jewellery or save it for later use. Thats what this money is.

SRoy · Post by **SRoy** » 10 Nov 2016 00:10

Hoarding black money is malicious intent. Intention to evade taxes.

Look at it other way. Say a natural disaster happens and bank with its locker vault disappears?

I simply don't get it. Keep aside habitual thieves, why does it not strike common people to entrust their money to a bank? Just because they have to pay taxes? They would be reaping interest from FD as well, so there won't be a net loss. Isn't it ?

Sanju · Post by **Sanju** » 10 Nov 2016 00:18

Chandragupta wrote:
SRoy wrote:^^

20-75 Lakhs in cash are not big fishes. True.
They are not small fishes either.

Offer them your sympathies. 10 Lakh plus deposits are treatable as tax evasions.

Keeping such sums in lockers instead of accounts (foregoing interests ???? ) means either idiocy or malicious intent. Or maybe both.
Lol @ malicious intent. No, all RE deals in India are 20-80 white:black or near about. This is the way it happens. So you dont deposit the 80% into your account, you either reinvest it in re or jewellery or save it for later use. Thats what this money is.

Not true about the 20:80. In Goa we paid 100% White and in God's Own Country we received 50:50. We asked for all White, but no one could pay that much.

Suraj · Post by **Suraj** » 10 Nov 2016 00:30

Chandragupta wrote: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?

Why didn't they just deposit it regularly ? Once the money's deposited in the bank it's white money. If they have Rs.20-75 lakh cash lying about home or keep it in a bank in lockers instead of depositing it, then they have multiple problems, and being a BJP supporter isn't going to matter, nor should it. They wanted to save themselves the tax. They ignored the income disclosure scheme. What more did they need ? Patriotism is not a refuge from this.

g.sarkar · Post by **g.sarkar** » 10 Nov 2016 00:35

http://zeenews.india.com/news/india/fak ... 48104.html
Fake currency printing press in Pakistan have to shut now: Kiren Rijiju
Last Updated: Wednesday, November 9, 2016 - 18:59
New Delhi: Union Minister Kiren Rijiju today said the demonetisation of Rs 1000 and Rs 500 notes will lead to closure of "printing press" in Pakistan, where fake Indian currency notes are printed.
Congratulating the Prime Minister for the "bold decision", Rijiju said the action will check corruption and black money besides curbing terror funding and circulation of fake Indian currency notes.
"The printing press in Karachi and Peshawar will now have to shut down due to demonetisation of Rs 1,000 and Rs 500 notes," he told reporters here.
The Minister of State for Home said fake currency note has become one of the major headaches for security agencies till now.
......
Gautam
PS my stupid poochh, while the pak presses will stop, what is to prevent them to start printing the new Rs.2000? with Chinese help they should be able to copy the new currency and start the game all over again.

Primus · Post by **Primus** » 10 Nov 2016 00:58

Chandragupta wrote: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?

Hmm...... I don't buy this argument. How does this differ from the 'big fish'?

You can't plead immunity because you 'only' have 20-75 lakhs. The next guy will have 20-75 crores and the next one 200-750 crores and so on. ANY amount of black money is tainted.

Is bazaar mein sab nange hain!

I too have a property in West Delhi that we've been trying to sell and were never offered all White so it is still 'under construction'. I know the price will drop to 50% or even less if we want it all in White (we do). It's a big loss but heck, I'd rather sleep at night.

The problem is that it is the everyday, otherwise law-abiding citizen that perpetuates the status quo. Every time we want to jump a queue or get the job we really do not deserve but want it any way, we end up bribing somebody for the privilege and the cycle continues. Same with Black Money. If everyone refused to buy/sell, no matter the consequences, it would not have needed the unprecedented action by Modi Ji.

The lure of money, especially easy money is almost irresistible. I know, been there myself, sadly.

Gus · Post by **Gus** » 10 Nov 2016 01:09

somebody had 20-75 lakh and did not put that in an account where it earns interest and puts it in a locker "for a rainy day" where it erodes in value due to inflation?

and this is white? ya right...-

Gus · Post by **Gus** » 10 Nov 2016 01:14

when the govt says 50,000 needs a PAN card, it does not mean you go in and deposit 49,999 a dozen times. that WILL attract notice and questions and you are liable to explain. you cannot say "but but but, i only deposited 49. your limit is 50"

Gus · Post by **Gus** » 10 Nov 2016 01:15

Rishi Verma wrote:
shravanp wrote:A friend of mine has measly Rs 20 Lakhs and is contemplating whether to deposit and incur 200% penalty or simply burn it.
Due to smog issue please advice him not to burn it. It's biodegradable and can be composted.

many years ago, saw a statue made of million dollar papers at ripley's museum. like literally a million dollars mashed up.

people can do some creative things like that with their black money..

Rishi Verma · Post by **Rishi Verma** » 10 Nov 2016 01:23

My expectations:
If one tax-evading movie star lost 10cr
If one corrupt politician lost 10cr
If one corrupt politician lost election due to this
If one paki lost his job from printing press
If one black money hoarder died due to heart-attack
If one couple from a corrupt family returned from Hong Kong shopping trip to find that they are bankrupted

If any one of above is accomplished, I will feel happy.

SSharma · Post by **SSharma** » 10 Nov 2016 01:40

per my sources, traders in guj/mumbai already found a novel way of making it all white after paying a ~5% commission to the conduits.

hopefully the IT dept takes action on this as i am sure they are more aware than me of what is going on.

Suraj · Post by **Suraj** » 10 Nov 2016 01:49

SSharma wrote:per my sources, traders in guj/mumbai already found a novel way of making it all white after paying a ~5% commission to the conduits.

hopefully the IT dept takes action on this as i am sure they are more aware than me of what is going on.

Anyone thinking their problems are over once the cash is out of their hands, is in for a surprise knock on the door later. No number of conduits is going to help them. In probabilistic terms, the more conduits that are created, there more points of failure will exist. Each of them individually have less to lose by ratting out the source of cash, and therefore the overall probability of conviction is always greater when you choose to use multiple conduits splitting a smaller amount amongst them, and in fact more conduits worsens your odds of detection rather than improves the chances of concealment. Your probability of safety is always greater when you keep it on hand yourself, and destroy whatever you can't deposit and eat the losses for. GoI can easily mandate a greater punishment for those caught indirectly rather than directly, i.e., incriminating yourself gets you some leniency you lose if someone else incriminates you.

JayS · Post by **JayS** » 10 Nov 2016 02:02

Got from watsapp.

A news published in Gujju paper on 1st April this yr..

Interesting...

https://drive.google.com/file/d/0B9ijXl ... p=drivesdk

Someone can translate in english??

hanumadu · Post by **hanumadu** » 10 Nov 2016 02:08

The government must educate not to abet any GM hoarders in exchanging their currency. It should let the people know that they will be caught and of the severe consequences if caught.

Marten · Post by **Marten** » 10 Nov 2016 02:08

Gus wrote:when the govt says 50,000 needs a PAN card, it does not mean you go in and deposit 49,999 a dozen times. that WILL attract notice and questions and you are liable to explain. you cannot say "but but but, i only deposited 49. your limit is 50"

There is basically a query that runs for the amount. They will nail folks by the number of times transactions occurred. This is current functionality and not new. But spare a thought for the babus themselves. Anyone who has dealt with IRS/gazetted officers in the dept knows that there is a HUGE massive cash element in all their dealings. They would have put away a lot of money and they themselves are stuck at this point.

Just saw a politician in Kolar giving away 3lacs per head as an interest-free loan - for 6 months. Now multiply this by a million politicians and see where this is going? ALL of the money will re-enter the stream, but once it changes denominations, the Govt knows the real size of the economy.

PS: Anyone wants to bet on why SS was muzzled about this move? He has already talked about this in a couple of seminars but people didn't take it seriously. Would love to be a fly on the wall during the committee meetings.

Rishi Verma · Post by **Rishi Verma** » 10 Nov 2016 02:30

JayS wrote:Got from watsapp.

A news published in Gujju paper on 1st April this yr..

Interesting...

https://drive.google.com/file/d/0B9ijXl ... p=drivesdk

Someone can translate in english??

Can't read it but it's photoshopped

Rishi Verma · Post by **Rishi Verma** » 10 Nov 2016 02:35

hanumadu wrote:The government must educate not to abet any GM hoarders in exchanging their currency. It should let the people know that they will be caught and of the severe consequences if caught.

I think time window is too short to be able to deposit crores even if you used employees. A few lacs are manageable. Some small fish may be able to deposit, most big fish are doomed.

bhavani · Post by **bhavani** » 10 Nov 2016 03:24

I am from Vizag and a number of my relatives are in Liquor and Real estate business. Now there is absolute panic in those circles. Many of them hold anywhere between 50 Lakhs -Hundreds of Crores in Cash. Some are offering salaries to their staff for the next few months in cash, One prominent relative of mine who owns an engineering college, is now paying workers who work for him salaries for the next few weeks at a construction site. He has enrolled around 400 folks from the immediate families to work for him. He is paying really hefty amounts to these folks ( around 30 percent) for converting his cash. he is actual paying a lot of folks money for the next few months.

This guy lost in 2009 MLA elections as TDP candidate, then he spent around 50 crores in cash. I myself saw suitcases of Cash being Transported. Most of the cash that comes as donations from the engineering college is stored as cash.

BUt i think he will end up losing a few hundreds of Crores in Cash. I am actually jumping up and down in cash thinking about all these jackasses who have stocked cash in Boxes, beds, Below the ground, Suitcases. we write Java code and work 24/7 and still cant afford what these guys could afford all these days. Now i am -->

Most hit would be a lot of government employees in Registar offices, Sales tax, R&B Offices who have hoarded most in cash. Also a number of Andhra movie folks will really hit as most of the transactions happen in Cash.

MohdKav · Post by **MohdKav** » 10 Nov 2016 03:28

SSharma wrote:per my sources, traders in guj/mumbai already found a novel way of making it all white after paying a ~5% commission to the conduits.

hopefully the IT dept takes action on this as i am sure they are more aware than me of what is going on.

Your sources are wrong. 5% is the usual rate asked by conduits for changing black into white. Here this is an extraordinary situation, the legal tender to be changed doesnt have any value. If at all they have found any novel way, which I am sure they have, the commission wont be 5% for sure.

MohdKav · Post by **MohdKav** » 10 Nov 2016 03:36

within 6 months, black money will start forming again.
The IT department is already corrupt and more importantly over stretched.
Most important aspect of the exercise, complete eradication islamic black money - parallel economy, only people in the know, really know about how big and powerful this is. Fake currency is gone but black money is a futile exercise.
BJP will win UP Elections
There will be substantial increase in GDP, there will be a 20-40% percent correction in real estate for the next 2 years.
Money can always be transacted abroad, its not that difficult to be set up an account abroad and do all the transactions there,

pankajs · Post by **pankajs** » 10 Nov 2016 03:36

Even if these folks are able to save say 60% of their cash hoard they took a 40% cut. After ALL the planning, hiding, fearing raid, greasing palm, etc they still ended up taking 40% cut. Next time why not pay 35% tax at the outset and put the money in the bank and live tension free? This is the message that is going to go out even to the folks who are able to salvage some money out of the situation.

This of-course does not apply to Gov employees, drug dealers, etc who are involved in criminal/illegal activities.

MohdKav · Post by **MohdKav** » 10 Nov 2016 03:39

pankajs wrote:Even if these folks are able to save say 60% of their cash hoard they took a 40% cut. After ALL the planning, hiding, fearing raid, greasing palm, etc they still ended up taking 40% cut. Next time why not pay 35% tax at the outset and put the money in the bank and live tension free? This is the message that is going to go out even to the folks who are able to salvage some money out of the situation.

This of-course does not apply to Gov employees, drug dealers, etc who are involved in criminal/illegal activities.

Government cant demonetize every 5 years.
Also, Black money is going to start piling up again after 6 months
Whatever fake currency and cash that has been horded is as good as gone.
Cash horded, there are some methods but all of them will incur 30% loss in value.

pankajs · Post by **pankajs** » 10 Nov 2016 03:43

The next phase is digital transactions. Wave you phone to make payment at the pan wallas. That will again cut down the currency circulation and with it the cash hoarding.

There is a Modi mantra for this. It is a three pronged strategy that started with Jan Dhan yojna and will end with mobile payment.

pankajs · Post by **pankajs** » 10 Nov 2016 03:46

Ok ... here it is. After a while, say 5 years, you will NOT be able to do any high valued transaction in cash.

http://www.livemint.com/Politics/jucQ9N ... onomy.html
Mann ki baat: Modi emphasises need for digital payments

Narendra Modi says Jan Dhan, Aadhaar and mobile (JAM) together can help the nation move towards a cashless economy
......
He added, “Jan Dhan, Aadhaar and mobile (JAM) together can help us move towards a cashless economy. If we use the measures (made available by the government) we will able to bring transparency and reduce black money.”

He said that the government had started various measures including RuPay card and online transactions to make the transition easier.

Bart S · Post by **Bart S** » 10 Nov 2016 04:01

Gus wrote:when the govt says 50,000 needs a PAN card, it does not mean you go in and deposit 49,999 a dozen times. that WILL attract notice and questions and you are liable to explain. you cannot say "but but but, i only deposited 49. your limit is 50"

I think that rule applies to regular cash withdrawals/deposits at banks. For the 500/1000 Rs notes, every person depositing for whatever amount will have to show PAN and some form of ID.

JohnTitor · Post by **JohnTitor** » 10 Nov 2016 04:03

http://indianexpress.com/article/cities ... t-4367139/

wtf???? I hope the court throws this out! Inconvenience? More like corrupt! I bet these guys have 10s of crores stashed away

---
I bet there will be another amnesty sometime next year.. with say 50-60% tax no questions asked. This time, a lot more people will declare it fearing another strike!

khan · Post by **khan** » 10 Nov 2016 04:24

Suraj wrote:
SSharma wrote:per my sources, traders in guj/mumbai already found a novel way of making it all white after paying a ~5% commission to the conduits.

hopefully the IT dept takes action on this as i am sure they are more aware than me of what is going on.
Anyone thinking their problems are over once the cash is out of their hands, is in for a surprise knock on the door later. No number of conduits is going to help them. In probabilistic terms, the more conduits that are created, there more points of failure will exist. Each of them individually have less to lose by ratting out the source of cash, and therefore the overall probability of conviction is always greater when you choose to use multiple conduits splitting a smaller amount amongst them, and in fact more conduits worsens your odds of detection rather than improves the chances of concealment. Your probability of safety is always greater when you keep it on hand yourself, and destroy whatever you can't deposit and eat the losses for. GoI can easily mandate a greater punishment for those caught indirectly rather than directly, i.e., incriminating yourself gets you some leniency you lose if someone else incriminates you.

It could be something as simple as one or a group of corrupt bank employees.

nachiket · Post by **nachiket** » 10 Nov 2016 04:37

IMHO a lot of the black money hoarders will deposit their money with banks and take a chance with the IT department, rather than throwing it away. They are going to have a lot of work on their hands anyway and would like to go after the really big fish. But the side-effect of that might be that the cash reserves of our stressed banks might suddenly go up. Even if the IT department doesn't catch most of the tax evaders and bribe takers, this might be a shot int he arm for the economy by itself.

But I wonder how the people in villages are going to cope. The closest bank might be dozens of km away or more. Especially in states where many villages still do not have electricity. Will take time for this news to percolate to everyone as well.

Marten · Post by **Marten** » 10 Nov 2016 04:46

MohdKav wrote:
SSharma wrote:per my sources, traders in guj/mumbai already found a novel way of making it all white after paying a ~5% commission to the conduits.

hopefully the IT dept takes action on this as i am sure they are more aware than me of what is going on.
Your sources are wrong. 5% is the usual rate asked by conduits for changing black into white. Here this is an extraordinary situation, the legal tender to be changed doesnt have any value. If at all they have found any novel way, which I am sure they have, the commission wont be 5% for sure.

I'd like to meet the folks who will charge only 5% for B2W (what is called making an entry). It is simply impossible - from whatever I've seen, the rate goes from 8% for regular large scale customers to 12/15% for normal folks. Do not ask me how I know - I do not have any black money or illegal sources of income. However, we were stuck with a bunch of money for our land and the buyer ended up giving 10% extra for the black portion due to the conversion rates we had agreed upon. I'd insisted on all while while family members didn't care because they could manage. One of my neighbours is a well known Dr in our locality and has been ranting incessantly on the whatsapp group! It is indeed inconvenient for him since almost all of his business is cash only. And God knows how much of that is really reported and accounted for.