9th November, 2016 is a day etched in India’s history! When Prime Minister Narendra Modi took the whole nation by surprise with the demonetization of Rs. 500 and Rs. 1,000 notes, tax evaders sought help from Google, with “How to convert black money into white money” among the top queries on the search engine in India. Modi’s ban on Rs. 500 and Rs. 1,000 notes, a crackdown of sorts on tax evasion, makes 86 percent of currency in circulation worthless. In fact, if you amend the Google Trends query to “how to convert black money,” Haryana tops the list with Gujarat close behind. Other states asking the same question include Punjab, which is due to hold elections early next year, and the capital Delhi. Unexplained cash often crops up at election time to bribe voters.
However, people, sitting on a huge pile of untaxed cash have found some really interesting ways to dispose off the amount, as per a report in Economic Times. While the common people of the country are spending the better half of their day standing in the queue outside a bank branch or ATMs to exchange or deposit their hard earned money, there are some people who are brainstorming about means to dispose their huge stash of black money. As one can’t deposit or exchange their old currency beyond a certain limit, cash worth lakhs is bound to be wasted.
India is a country of jugaad and there are a couple of rescue paths and tricks that people are using/used to convert their black to white, investment in gold, exchange via religious places, paying advance salary to employees etc.
Full payment in advance
The wedding season is on. Where you need to pay a fraction of the bill in advance for the marriage functions, some customers are making full payments in advance. Marriage palace owners share how most of the customers are ready to pay immediately, and are not doing any bargaining which is unusual. People have paid in advance even for marriages scheduled in January and February.
All cash, no cheques
A marriage palace owner said while they are accepting cheques, people are insisting on cash payments. “We are facing the heat but are left with no option but to accept the cash in old notes as our business has already suffered a lot,” he said.
‘Please adjust our money’
Can we deposit Rs 2.5 lakh in your bank account? This would sound familiar to many residents as this is what many people are asking each other. They are approaching friends, neighbours or whosoever they can, after the government’s announcement that deposits over Rs 2.5 lakh would be under the scanner. The response varies from person to person. Those who know it can invite the taxman at their doorstep excuse themselves but some others are being nice enough. There are some others who say they will do it for a price.
Poor Rich Man
Some of the companies have asked their employees to provide their account numbers so that the management can transfer its money into their accounts, with an undertaking that the employees would be paying back the money later. Some black money holders have allegedly devised a unique way to deposit their money. They stash their money in a poor person’s account and with a promise that while withdrawing the money later, they will pay 10 percent of the amount to the person. Funnelling money through poor people whose bank transactions will not arouse suspicion, is indeed jugaad which doesn’t even appear like one. There are also people willing to give interest free loans to the poor – which may seem like a good impact of demonetisation but is actually an effort to convert black money into white and defeat the purpose.
From Black to Gold
Gold was the first choice of those who have hordes of money with them. Some bought Rs 10 grams for Rs 50,000 when the rates were Rs 30,000; and they say that they don’t even know whether they have made a wise investment. Many black money owners made the most of four hours from Modi’s announcement to 12 midnight on 9th November and bought gold till midnight. There have also been reports, again, of gold selling in back dated transactions. Jewellers happily sold gold at a high premium. In some shops the demand was so high there was pandemonium with buyers fighting amongst each other to be able to buy first. The government has asked top jewellers to give details of gold transactions after the demonetisation. Many jewellery shops haven’t opened since tax sleuths landed at jewellery shops across the country.
Bank Note Mafia
Overnight, a banknote mafia has emerged. These are people accepting old Rs 500 and 1,000 notes and giving back anywhere from 15% to 80% of the value in Rs 100 notes. The people collecting old notes will be able to earn a profit by converting them into white, new currency through poor people, or through other means.
Some people are learnt to have exchanged their Rs 500 and 1,000 notes with currency notes of lower denomination at a heavy price. Some paid Rs 1 lakh and were happy getting between Rs 70,000 and Rs 80,000 in return.
The Good Old Farmer
Since agricultural income is exempted from income tax, hoarders are buying dollars from the farmers, which they get from their relatives in the US, Canada and the UK, through money-changers, who charge between 25% and 30% of the cut for the entire transaction. While the farmers conveniently deposit the cash (old notes) they had taken from black money hoarders in their savings account, the hoarders will keep the foreign currency with them till the market stabilizes and will later sell it as per the trading value of the Indian currency in the market.