No escape route for black money holders

In informal chat with a few police and income tax officials, the picture that is being given is too bleak for a black money holder. Except for some low-profile operators, who have a few wads of 100-rupee notes, demonitisation of Rs 500 and Rs 1,000 has been a major blow to several others. The small time hawala dealers started making a quick buck by giving 100-rupee notes in exchange for Rs 500 and Rs 1,000 for a commission. 

Sources told DTNext that many had taken a commission of up to Rs 300 for every thousand rupees but they also had only a limited supply of 100-rupee notes. Police said that they were small operators taking the notes only to later deposit them in banks. “The amount involved in this exchange is too less for us to get involved,” a senior police official said. But, the condition of those possessing unaccounted cash was bad. 

The only option for them to legalise the black money in their possession is banks now that too by December 30. “They have no other way but to legalise it by paying a tax of 30 per cent. Beyond this, they will have to show the source during the income tax scrutiny next year and they may have to pay penalties ranging from 100 per cent to 300 per cent of their tax liability,” a senior Income Tax official told DTNext . 

Sources said the scrutiny was being done as per Section 271 of the Income Tax Act. Tax officials said there was also no possibility of sending the Indian currency abroad for conversion and putting them in overseas accounts. “Even if someone manages to smuggle the cash out of the country, they will not be able to exchange them there. If an Indian currency value can be gained, the currency has to come back to India. So that option is shut,” the official added. 

The only option that some of the black money holders had was to invest in gold and that was what most of them did throughout the night on Tuesday which continued till the early hours on Wednesday. Sources said a huge amount of gold has been purchased from jewellery stores on Tuesday and all the transactions were done through cash. “This was one of the methods adopted by some to retain the money with them. 

However, when they sell this gold, the money will not be handed over to them, but will be deposited in their account. So there again they will have to show the source and remit tax,” the official said.