Francis Fernandes
Come April 1, 2017, ban on cash transactions of more than Rs 3 lakhs as proposed in the Union Budget 2017-18 to settle any transaction comes into effect. The Government of India has to be complimented for this populist step. According to Union government sources the penalty for doing cash transactions above Rs 3 lakhs will be steep and the receiver will have to pay an equal amount of the cash received. If a cash transaction is done of Rs 5 lakhs the payee as well as the beneficiary will have to pay a penalty of RS 5 laKHs each. The step is basically meant to target the ever growing menace of black money.
There are 3 main sources of black money. Black money is created every time there is a transaction that is deliberately hidden from the tax man, such as companies in mining, selling and exporting more than they declare in their excise form, royalty statement or invoices, corrupt officials taking bribes from companies that cheat the tax man and small entrepreneurs and businesses from a grocer to a local doctor who earn cash and do not declare their income.
Until recently before demonetisation a transaction involving in real estate of Rs fifty lakhs, the actual revenue earnings of the government was a stamp duty on Rs 20 lakhs. The remaining Rs 30 lakhs used to be a cash transaction passed on between by the buyer and the seller without any receipts which was profitable to both, the seller accumulating wealth of rupees thirty lakhs and the buyer paying a duty just on Rs 20 lakhs and parting with another Rs 30 lakhs. The end result the tax man or the Government of India being cheated on stamp duty to the tune of Rs 30 lakhs. This is only a small example. In modern times transactions in real estate involves crores of rupees. Imagine in a transaction involving three crores the tax man or the government of India receiving stamp duty just on one crore and the remaining two crores are hidden from the tax man which leads to generation of black money which in turn has to be invested in one way or the other. These fictitious transactions are not possible without the active knowledge and cooperation of the Registrars or officials of the government.
There are four main uses of black money. A lot of these is stashed in foreign banks, and other safe havens, some of these is laundered and brought back as white money for investment, a lot of black money goes in assets like property, gold and jewellery whose value grows over the time, some people keep black money as cash and some really prudent people give black money to political parties for favours received.
Black money is a curse on the poorest sections of our society. It divides the gap between the rich and the poor. The rich have become richer and today there are richest persons in India who figure in the list of World Richest Persons. This step by the Modi government will go a long way to curb corruption and generation of black money.
