(Originally written in May 2010, Copywrite © Jai Prakash Rarh)
What is Black Money?
Generally speaking, black money is money received or paid in CASH without depositing it in a bank account. But actual black money is the income not accounted for and neither disclosed with revenue authorities as income received nor expenses incurred in CASH or by Cheque or in other consideration. To avoid tax the same is stashed away either in swiss banks or kept in cash transactions.
Impact?
Real income remains unaccounted for, hence financial reports submitted with government authorities or the users do not disclose true and correct results and state of affairs of the businesses and hence the whole country's correct GDP is just an eyewash.
In the presence of this parallel economy of black money, the figures available for the economic growth of the country (GDP) cannot be relied upon fully. They are only an indicator (that’s too not certain indication)
Govt. loses lots of revenue, which leads to corruption, financial fraud takes place, improper distribution of income, genuine financial transactions that can’t be proved in courts against culprits, etc., etc.,
What to Do?
Do accounting of every penny spent or received by any person either in cash or cheque or any other form.
Who will do the Accounting?
The system will do!
What is the system?
If Govt. Passes following rules in coming Finance budget;--> Govt. will buy back all of its currency notes during the next financial year and will issue a Machine called ‘Cash Storage & Transfer Device’ (CSTD) or call it cash machine in consideration of Cash Purchase at a certain price (cost and distribution charges of the machine may not cost more than Rs.1000). The device is like an iPod / mobile with data storage, display, and transfer facility and with an inbuilt data transfer system (All these features can be integrated into Mobile phones also!).
--> Password protection system to operate the machine.
--> All Nationalised banks will be authorized to buy back currency and issue this machine
The amount of Cash sold by an individual will be stored by the bank in the machine containing the currency number (or without currency no. subject to some other security measure) after deducting the price of the machine.
--> With effect from 1.4.20XX, all currency notes will become invalid.
--> The minimum amount required to be deposited with the bank will be the price of the machine or the bank can finance the device at a certain interest rate (say 5% p.a.) deductible in installments.
--> One can deposit cash in the machine (Sale cash to the bank which will deposit it in his/her device) during the financial year at any number of times, at any number of bank branches, and any place in the country.
--> The amount of Cash Deposited during the year will be taxed at the special rate of tax as follows; No tax up to the cash deposit of Rs.50Lacs
Tax @1% up to Rs.1 Cr (on next Rs.50Lacs only)
Tax @2% up to Rs.1.5 Cr
Tax @3% up to Rs.2 Cr
Tax @4% up-to Rs.2.5Cr
Tax @5% up to Rs.5 Cr
Tax @10% beyond Rs.5 Cr
--> The depositor can revise his balance sheet as of 31st march 20XX to account for Cash in Hand accordingly and based on this information no income escaping assessment or previous year assessments should be revised. He/she will be immune against this disclosure like VDS (Once introduced in Income Tax Act)
--> Through this machine one can make a payment to another person using dialing the Unique Code No. (like mobile no.) of the machine of the payee (like generating and receiving calls through mobile phone). No transfer can take place without entering certain details of the transaction;
i) Code No of Payee
ii) Purpose of Payment (Nature of transaction, some of commonly used will be pre-defined) [once entered saved in the system and will be displayed automatically next time.
iii) Amount--> To withdraw Cash from the Bank account (for self-cheque put your Machine Code No or bearer’s machine code no. ATM withdrawal can be made by dialing your Code no from ATM Machine after entering your ATM PIN.
--> The owner of the device will have full liberty and discretion in making payment out of that device to any person. No Govt. can either block or freeze his/her device or sweep out the balance from the device without his/her consent under any circumstances.
--> In case of Malfunction or Damage to the machine one can get either repaired (if possible) or get issued another one by making payment. In case of replacement or loss of data in the machine, one can get all data to be restored in the new/same device. This thing could be done only through the procedure of the court and in the manner provided in the recovery procedure.
--> You can see Balance in hand and full Cash Book Details since the inception with the Unique Code No of the Payee (Like Mobile No.) and the Name, address, and other details of the payee will be saved automatically in your machine once you made a transfer of cash in his machine
[since these details are already entered while issuing machine, and when money is transferred a confirmation message will come with Name and Address of the payee and entry will be reflected in cash book a/c along with cash balance in hand after transfer].
One can print, save & mail the details.
--> Banks will forward Cash purchased to RBI along with the personnel details of the issuer with his ID Documents, Photo Etc., and the amount of Cash Deposited by him. Amount of Cash Stored in his device etc.,
--> RBI will maintain a full database of cash purchased and stored in the machine. Every transaction of cash transfer will be stored in the main database of RBI on a real-time basis
(like mobile calls are stored in the Database of Operators, on the same technology and with the help of the existing Mobile Operators and their transmitter).
--> One person can buy only one device in his name. One can purchase a device even in the name of 1 day's child also (subject to his ID Proof). One can purchase one machine in the name of a person as defined in the Income Tax Act. (Co/Firm/AOP/BOI/HUF etc.)
I think U Got the Idea!
Point No. 4 will let every black money come out and will be accounted for. The identity of the owner of the cash will be established. Each transaction will be accounted for. The income Tax Department Can ask for cash transactions of an assessee from RBI. Every penny spent will be accounted for by the system. It will beneficial for both the person as well as the govt.
How few Things will work?
1. No need to physically visit to get a money transfer in our machine, simply ask the payer to enter your detail and make a transfer through satellite like making a call/sms/email
2. New type of ATM Machines.
3. Machine is transferable but transactions made by others from your machine will account for your turnover income or expenses
4. Password Protection Facility and Freezing of the machine on the complaint of the owner, a Cash balance transfer to a new machine, etc. will facilitate security from theft/loss.
5. Even in case of theft or fraud by breaking/getting a password before freezing, the payee will be identified immediately from the database and could be caught/arrested.
6. No fake currency
7. Automatic accounting on a real-time basis
8. Utility of Pocket Money to Children can be traced.
9. No Bribes/ Corruption otherwise one will be caught.
Outcome? When this black money economy will be merged with the white economy, govt. may find that even a rickshaw puller earns annual income much above the minimum taxable limit. And the middle-class family person or small-scale company may be found to be assessable and liable to pay huge taxes. Thereafter there will be a need for tax reforms having regard to the cost of living, health, education, and facilities provided by the govt. facilities availed by an individual etc. Following Tax reform could be introduced from the assessment year 2012-13; --> For calculation of the taxable income of an individual following additional expenses shall also be allowed to be deducted under Chapter VI; A Expenses incurred on Children/Self/Dependents education including transportation, books, touring and coaching, donations, out-of-pocket exp. (money transferred in children's devices up to the amount as may be notified by govt. from time to time {govt. can notify using a message or like email in the machine itself as and when needed or revised thing which is notified in the gazette of Country can also be notified in this cash machine (based on average cost incurred)[Since RBI has all database, the software can calculate immediately]. B. Any expenses incurred on Medical treatment of Self/Children/Dependent including the cost of medicines, Doctor fees, Hospitalization cost, OPD Exp. or traveling cost for treatment with attendant subject to the maximum cap as may be notified based on average cost calculated by the software. C. Interest paid on any loans as notified. D. Deduction on account of Travel/Transportation /Telephone /Food /Clothes based on average cost. E. Any other cost as may notify having regard to the necessity and needs for the survival, safety, liberty, etc. of a citizen of the country. 2. Rate income tax can be revised as; Individuals/HUF – Up-to 2L Nil (No need of diff between man and woman, Sr. Citizen could be relaxed), up-to 5L @5%, 5L-10L @10%, beyond 10L@20% Co/Firm – Up-to 5L@10%, beyond 10L @20% GST (General sales/service/excise/custom duty/) @4% only. No FBT, Surcharge, Cess, or purchase tax. CST etc 3. Every person is required to file ITR irrespective of his Income
4. Return of a person having Cash and Bank Balance/cash and bank transactions (either Dr/Cr/both) exceeding Rs.5L must be certified by a CA [Audit beyond Rs.1Cr.]