WHITENING THE BLACK Measures to Unearth Black Money By: Bhagwat, Bhargav, sweta & Lopa .

PRELUDE Rs.3500 thousand crores – rough estimate of black money circulating in the economy. An area of economic activity, which remains “underground”, concealed from the vision and approach of state authorities responsible for framing economic policies and implementing them.

Rs.3500 thousand crores – rough estimate of black money circulating in the economy.

An area of economic activity, which remains “underground”, concealed from the vision and approach of state authorities responsible for framing economic policies and implementing them.

PRELUDE Parallel Economy. Parallel Economy - 3 times as large as the legitimate or documented economy.

Parallel Economy.

Parallel Economy - 3 times as large as the legitimate or documented economy.

PRELUDE Economy is not denude of money. The money circulates in the economy itself, but it remains out of the ambit of taxation - both direct and indirect taxes.

Economy is not denude of money. The money circulates in the economy itself, but it remains out of the ambit of taxation - both direct and indirect taxes.

FM on Parallel Economy. “ There is the perennial issue of black or unaccounted money. There is evidence that black money has been increasing by leaps and bounds and now swamps the entire economy. “

“ There is the perennial issue of black or unaccounted money. There is evidence that black money has been increasing by leaps and bounds and now swamps the entire economy. “

VDIS SCHEME It is a tax amnesty scheme. Tax evaders would be asked to voluntarily disclose their non-taxed income. Source won’t be questioned & penalty won’t be levied. It was introduced in 1997. Total Income Disclosed was Rs. 33,000 crores and tax collection amounted to Rs. 10,050 crores.

It is a tax amnesty scheme.

Tax evaders would be asked to voluntarily disclose their non-taxed income.

Source won’t be questioned & penalty won’t be levied.

It was introduced in 1997.

Total Income Disclosed was Rs. 33,000 crores and tax collection amounted to Rs. 10,050 crores.

Issue of Zero Coupon Bonds This scheme was previously used in 1981-82, during the reign of Smt. Indira Gandhi.

This scheme was previously used in 1981-82, during the reign of Smt. Indira Gandhi.

Issue of Zero Coupon Bonds Tax evaders disclose their non-taxed money. The disclosed income is taxed at the current tax rates and for the balance amount [i.e. for disclosed income after deducting tax] the government issues redeemable bonds bearing zero percent rate of interest. The funds are deployed in productive sectors viz. infrastructure boosting overall growth of GDP.

Tax evaders disclose their non-taxed money.

The disclosed income is taxed at the current tax rates and for the balance amount [i.e. for disclosed income after deducting tax] the government issues redeemable bonds bearing zero percent rate of interest.

The funds are deployed in productive sectors viz. infrastructure boosting overall growth of GDP.

Simplification in Tax Rates Statistics manifests – When tax rates are reduced and tax laws are simplified and made rationale, tax compliance has increased. Long process - but slowly and eventually it would be able to ensure tax compliance to great extent. Prospective & not retrospective effect.

Statistics manifests – When tax rates are reduced and tax laws are simplified and made rationale, tax compliance has increased.

Long process - but slowly and eventually it would be able to ensure tax compliance to great extent.

Prospective & not retrospective effect.

Getting Rid Of Direct Taxes Direct taxes contributes to parallel economy. MMR=33% + bad enforcement of law, majority of people either don’t pay tax or don’t completely declare their income. Only 2% of the population pay taxes. DT - 2.8% of GDP & IDT - 5.9% of GDP. If direct tax is got rid off, it would increase income of tax payers by 10-30% and would also bring all the black money belonging to other millions into the mainstream economy.

Direct taxes contributes to parallel economy.

MMR=33% + bad enforcement of law, majority of people either don’t pay tax or don’t completely declare their income.

Only 2% of the population pay taxes.

DT - 2.8% of GDP & IDT - 5.9% of GDP.

If direct tax is got rid off, it would increase income of tax payers by 10-30% and would also bring all the black money belonging to other millions into the mainstream economy.

Getting Rid Of Direct Taxes This would, in effect, wipe out black money and bring more realistic picture of India’s GDP. This would increase disposable income. As a result, a far greater amount would be spent on various items, boosting overall demand.

This would, in effect, wipe out black money and bring more realistic picture of India’s GDP.

This would increase disposable income.

As a result, a far greater amount would be spent on various items, boosting overall demand.

Getting rid of Direct Taxes Government control over expenditure. Increase in demand would be enough to generate adequate revenue in form of indirect taxes to recover 2.8% of GDP which was earned through direct taxes. The other option is also to increase indirect taxes marginally. Further, government would not have to spend on I.T. Department reducing government expenditure quite heavily.

Government control over expenditure.

Increase in demand would be enough to generate adequate revenue in form of indirect taxes to recover 2.8% of GDP which was earned through direct taxes.

The other option is also to increase indirect taxes marginally.

Further, government would not have to spend on I.T. Department reducing government expenditure quite heavily.

Taxing Agriculture Agriculture provides an opportunity to conceal income or evade taxes. Diversion of income from taxable income to exempt income. Partial integration is insufficient.

Agriculture provides an opportunity to conceal income or evade taxes.

Diversion of income from taxable income to exempt income.

Partial integration is insufficient.

Reprinting or Changing Currency One of the most lucrative tool available at government’s end. The Government would withdraw entire lot of existing currency from the market or cease use of existing currency and float entirely new currency in the economy with equivalent value. This would be done through banking channels.

One of the most lucrative tool available at government’s end.

The Government would withdraw entire lot of existing currency from the market or cease use of existing currency and float entirely new currency in the economy with equivalent value.

This would be done through banking channels.

Reprinting or Changing Currency The conversion would be automatic up to a certain limit say Rs. 10 lacs and beyond that limit conversion would be permitted only if the holder can prove that tax has been paid on income. Bank deposits would be automatically converted into new currency. Currency in the form of notes and coins would be changed altogether in every five years.

The conversion would be automatic up to a certain limit say Rs. 10 lacs and beyond that limit conversion would be permitted only if the holder can prove that tax has been paid on income.

Bank deposits would be automatically converted into new currency.

Currency in the form of notes and coins would be changed altogether in every five years.

Reprinting or Changing Currency The assumption is – black money would be hoarded only in cash. It may be possible that it could be channelized into real estate, jewellery, financial instruments etc.

The assumption is – black money would be hoarded only in cash.

It may be possible that it could be channelized into real estate, jewellery, financial instruments etc.

Contact us at: Bhagwat Thakar : [email_address] Bhargav Vaghela : [email_address]

Bhagwat Thakar : [email_address]

Bhargav Vaghela : [email_address]