ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Tax Saving - Different Ways People Convert Black to White Money

Updated on November 29, 2011

Voluntary Disclosure of Income Scheme

There was a VDIS (Voluntary Disclosure of Income Scheme) from the Indian government in 1999 where the government asked the people to disclose there black money by paying 30% taxes and no action would be taken under income tax act against them. It was a massive success. The government was able to collect some Rs. 25000 crores as income tax through this scheme, so the number one way is to pay tax on your black money to make it white, and the government should start this scheme again instead of imposing more and more taxes on general public. If it is done again, everyone will be benefited, Black money holders, general public, and the government also.

Now below are some famous illegitimate ways people convert their black money to white money in India. I have compiled all of the ways I know till now:

Showing Income in Cash

Another popular way of converting black into white money is showing income in cash like tuition income or any other professional fees. Also people make investment where it is allowed to invest in cash and where the maturity is tax free for example buying an insurance policy where you are not required to show all your premiums and the maturity is tax free. For example your insurance premium is 25000/- per annum and you can pay 6000 in check (shown in books) and remaining in cash, people increasing the proportion of premium paid in cash increasing as and pay entire premium in white for last two years before maturity. No ITO is going to check premium of more then last two years and it is a small example. People are paying huge cash premiums everyday. In case of this small premium, the cost of investigation exceeds the benefit to the exchequer so the ITO will give a test check for at the max last two years.

Showing Income of Spouse

People also show certain income which their spouse has earned. For example, you give certain amount of cash as a gift or for the purpose of making an investment to your wife. She invests that amount in some shares or any other kinds of investment and earns an income and returns back the capital received. The income is reinvested and then profit is made. In this case, the clubbing provisions are also not attracted and also if the spouse is not earning any income, then it can be kept at a sufficient level to avoid taxation liability. There are also many ways of showing house property income.

Paying tax at 30%

The best course of action people take is they pay tax @ 30% and as the next option they open as many files as possible in the family, taking advantage of HUF and elderly people in the family. In that way, they take advantage of slab benefit as well as extra exemption available to elders and female income tax assessees.

Also, whenever an asset is transferred and an income is earned, it is clubbed in the hands of the transferor. However when the income so earned is again reinvested in another asset and income by way of dividend or interest is earned, then such an income is not liable to be clubbed again in the hands of the original transferor.

Converting black to white by way of check

People also give the black money to a person (say a family member or a friend) and take a check from them. They show that as a loan receipt and thus they can temporarily convert their black money into white. Then they again give them a check as a repayment of loan and receive cash which converts white to black again, but during the time the loan is outstanding, their convert their black into white, but people who do this are not aware that Section 68 on loans is applicable and you will have to prove the creditworthiness as well as the genuineness of transactions to the IT Department or else the loan receipt will be treated as income from undisclosed sources.

Black into white by the way of sale brokers

Some people for turning money black into white money choose the easiest way to go to a share broker or a commodity broker and take sale and purchase bills and the transactions reporting in profits because they settle many of the transactions between brokers. The brokers charge 3% to 5% for profit bills and 2% for loss bills.

Above are a few ways people utilize in their personal finances so that they are able to save tax but besides paying tax at 30%, everything else is illegitimate and fraud in eyes of income tax department.

P.S.: I don’t recommend readers to follow any of these steps. I just want them to be aware regarding these false practices.

I encourage open discussion regarding this article but advices, opinions, suggestions which may land the opinion seekers into trouble later on are not encouraged.

I trust that a tax planning should be done in such a way that it can stand the test of the legal battle of course subject to debates.

Any person giving advices and opinions which are without any foundation or fundamentals are not encouraged.

I request all the readers to stick to these guidelines before applying the above ways into practice.

Comments

    0 of 8192 characters used
    Post Comment

    • JvicIndia profile image

      John 

      14 months ago from India

      VDS, Demonetisation scheme etc in the past have only helped the rich convert black money to white. On the other hand, govt should reduce the tax rate so that more people come forward to pay rather than evade them

    • profile image

      Amitabh 

      4 years ago

      Taruni - Tu ek number ki dhakkan hai

    • soni2006 profile imageAUTHOR

      Rajinder Soni 

      5 years ago from New Delhi, India

      Investing in gold is profitable. Thanks Mohit.

    • profile image

      Mohit 

      5 years ago

      Invest in gold

    • profile image

      taruni 

      6 years ago

      LAST YEAR I TOOK MONEY FROM MY FRIEND. WITHOUT ANY INTERST NOW HE IS CHARGING ME 2% MONTHLY ITRST AND I HAVE ALREADY PAID ALL HIS PRINCIPAL AMOUNT I HAVEN'T SIGNED ANY KIND OF PAPER BUT AS A GENTLEMAN I AM PAYING HIS INTERST DO I NEED TO ASK HIM AANY KIND OF AGREEMET SO THAT HE CANNOT CHARGE ME MORE INTEREST

    • profile image

      Sheruvala 

      6 years ago

      You may contact any NGO or other institute which may help you in converting money from black to white, ya , ofcouse they may charge from you about 5% to 15% . . . .:-)

    • profile image

      MOHIT BHAMORIYA 

      6 years ago

      I THOUGHT GOVERNMENT WANT TO MAKE STRONG LAW TO SEE THIS LAW

      CORUPTED PEOPLE SUBMIT THERE BLACK MONEY TO INCOME TAX DEPARTMENT AND IT WILL CHANGE IN TO WHITE MONEY

    • profile image

      Yaman 9999843219 

      7 years ago

      nxt way is to pay ur black money to any of ur relative nt exceeding 50000 n get a cheque of same frm them coz till 50000 there is no liability for tax payment

    • profile image

      rajesh bandhiya 

      7 years ago

      black money sab badi currency me he to 1000 vali currency ko gold me reserve bank through karne se white money hi reh jayegi.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)