Converting black money to white is very common today. People use all illegal method to convert black money to white. 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.

Gujarat, Modi’s home state, led the searches to find ways to convert black money to white money, followed by Maharashtra and Haryana. While Maharashtra is home to the financial hub Mumbai, Haryana has been cropping up in news over the last year for controversial real estate deals, including some that are allegedly associated with the Congress Party.

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.

Black money is tax evaded income. It can be earned through both legal and illegal means. The majority of the black money is the income received in cash not accounted in books and not revealed to the government for tax purposes.

How does the black money get generated ?

Corruption – Mr. Blackappa, an officer in government service, demands Rs.1 lakh from Mr.Shortcut for doing a favour (say to approve the building sanction plan). Mr. Shortcut hands over Rs.1 Lakh to the officer in cash (no one takes a bribe in cheque/demand draft!). This money will not be accounted in the books of Blackappa and he won’t pay any taxes on it (it may be good to legalize bribe and collect taxes on it) Count # 1 – Rs.1,00,000 black money is generated.

How is it converted?

The difficult part is converting the black money into white money without any taxes. In all the above examples, the people who have earned money in cash (black money) can’t deposit it in the bank. Right? So, they have to hoard the cash somewhere, say in a bank locker, suitcase, etc. Or they can also spend this amount in cash towards the purchase of property, white goods, etc. Let’s understand the ways of converting black money.

Bogus Loan Entry

Popular method people use to convert black money to white is by showing bogus loan entry. Modus operandi under this case will be people give black money to friend or relative and take a cheque from them. This is kind of bogus loan entry to convert black money to white. In some cases people give repayment of this loan by giving back cheque. People doing this must understand that Income tax department is watching every transaction and tax payer have to prove genuineness of every transaction.

Social Cause

Another popular way used by people to convert black money to white is by formulating trust for social cause. They make executive bodies of own people in trust sometimes illiterate people like driver cook etc. They donate black money to this trust as charity to convert black money. On paper it is charity but off the shelf it is conversion of black money to white.

Agriculture Income

Another popular way of converting black money in to white is by showing income as agriculture income. In order to show income as agriculture income you must possess land and it must be used for agriculture purpose like plantation, garden nursery etc.

Depositing in banks less than Rs.50000

This route is taken by small time operators. They open multiple bank accounts and deposit cash upto Rs.50000 at a time. Remember, if you have to deposit over Rs.50000, you have to give PAN details to the banker. Mostly, these kind of petty transactions goes unnoticed by the income tax department and thus, black money is converted to white without paying any taxes.

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Showing Cash Income from Profession

Another popular way to convert black money to white is by showing income in cash. Income from tuition, professional fees or commission is shown as cash by many tax payers it is nothing but converting black money in white.

Converting black to white by way of cheque

People also give the black money to a person (say a family member or a friend) and take a cheque 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, they 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.

Sale of personal belonging like Jewelry

Go to known jeweler and give him all black money you want to convert. He will give you cheque for the same amount. He will also give you purchase bill showing you sold your personal Jewelry to him. By this way your Black money is converted to white and you need not to pay capital gain tax even.

Converting Black money by Investment

Another method people use to convert black money to white is by making investment in cash.

People purchase insurance policy and pay premium in cash. For example if insurance premium is 50000 Rs/- payable quarterly, than people pay first premium via cheque and rest all premium in cash. This is most simple and popular way to convert black money in white.

Getting Black money as gift

Another popular way to convert black money to white is by getting gift from relative. Modus operandi is simple you have black money and your relative has the same amount of white money. Your relative issues cheque to you as gift and you will give your black money to him/her.

Depositing Black Money on name of Family members

Another popular method for converting black money to white is to open bank account on each and every individual family member. Deposit black money on the name of every family member to convert it in white.

By Real Estate

Real estate is sector where majority of black money is parked. People use real estate deals to convert black money to white. It is observed that people do fake real estate deal exchange money and cancel these deals due to non-payment of money.

By Declaring Black Money

Best method for converting black money to white as per me is by declaring this money to IT authorities and paying tax on this money to convert it in white.