Eliminate/ Reduce Internal Black Money In India
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Mr. Modi and BJP promised to eliminate black money and bring the money blocked in tax havens abroad. PM took the first step to constitute the SIT as was required by SC but not complied by the previous Govt. That was the first small but important step of the Govt. Having said that nothing seems to have been done or at least nothing is visible to the common man. Major steps , I am sure, are being taken to recover money lodged in other countries.
It is also important to take some small steps which will be visible to and understood by the common man. Such steps will reinforce the confidence of citizens which seems to be dwindling now. Internal Black Money is one of the major factors that rob the govt of revenue and cripples the govt., financially. Everyone knows that it is almost impossible to have a real estate transaction with all white money. No electrical, hardware, plumbing shops and even small shops of grocery etc (Barring Malls etc) issue tax invoice for their sales. They issue only Estimate bill if you insist on receipt. There are even shops which refuse to supply the product if the buyer insists on tax bill even when buyer is ready to pay the approx 12% tax involved. The extent of tax evasion on such scores is enormous. It is apparent that products manufactured in the factories are not being declared to avoid tax. In order to reduce such evasion (total elimination is not possible and hence used the word reduce) the following steps should be taken
1. All transactions of rupees five hundred and above must be made electronically/through Banks/Cheques/Drafts. Any cash transaction of 500 and above is to be made illegal and punishable with Rigorous imprisonment. Finance Minister is already making statement that transactions above some threshold amount should be only electronic/cheque/draft etc.. So there should be no difficulty in its implementation and hope it does not require support at Rajya Sabha for implementation
2. In order to facilitate the above step Govt. should freely issue Rupay cards to all those who desire. Jan Dhan yojana is already in place for transaction through Bank Account. With spread of Mobile phones and mobile banking / payment gateways being available the implementation should not create any major problem.
3. Demonetize all notes and coins, if any, of denominations Rs. 100/- and above so as to make it difficult for people to store black money in cash. May be RBI’s consent is required and suppose it should not pose problem as the cause is easy to understand for the Governor and should not have any reservation is giving his assent. This will facilitate bringing out all the black money stored and Govt. will get information on who has exchanged and how much cash of high denomination notes for further investigation of disproportionate asset case against them.
The above id marginal modification of suggestions drawn from primarily from the blog of Prof. R.Vaidhyanathan, Professor finance and Control, Indian Institute of Management, Bangalore.
The result will be increased tax collection and visibility to the people on the serious steps taken by the Govt to reduce or eliminate Black money and actual reduction of internal Black money.
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