Banking Article, Banking Finance 2020, Banking Finance January 2020



Black money is the money which is earned or received, avoiding the eyes of the Government mainly for the purpose of evading taxes. As taxes are mandatory for any nation to grow, black money is a big hurdle in the progress of any nation. A big part of black money is used for corruption also. The corrupt use black money in various ways. Thus, it’s a chain generating each other. Here, we discuss the work done till now and probable solutions to the menace.



  1. The Government has introduced Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. It aims to impose tax/penalty onblack money and undisclosed foreign assets. It came into effect from 01.07.2015.
  2. Goods and Services Tax (GST) has been rolled out w.e.f. 01.07.2017. Many people used to fudge their account books to save tax and hence, they used to transact mostly in cash to hide their dealings. GST encourages businesses to bring all their sale, purchase into books. It will also compel them to route their sale proceed through their bank account which in turn, will be beneficial for their lender also, as it will add to the confidence of the lending bank, while assessing enhancement or continuation of loan. Apparently, it is good for the borrower also, as they will be easily getting enhancement of limit / loan from their bank.
  3. Demonetization of Rs 500 and Rs 1000 currency notes since the night of 08.11.2016. It compelled people to deposit their cash in accounts.
  4. Promotion of Cashless India (Promotion of Digital Payments): How it will curb black money has been detailed later within heading “SUGGESTION ON CASHLESS INDIA”. A few measures taken by Government are:
  5. DigiShala, which is an educational and non-commercial TV channel on DD Free Dish.
  6. “Digital Finance for Rural India: Creating Awareness and Access through Common Service Centers (CSCs)” under Digital Saksharta Abhiyan (DISHA).
  7. ‘Vittiya Saksharta Abhiyan (VISAKA)’
  8. Introduction of user friendly digital modes/Apps like BHIM UPI (Unified Payments Interface), BHARAT QR, BBPS (Bharat Bill Payment System), USSD (Unstructured Supplementary Service Data), Micro ATM, AEPS (Aadhar Enabled Payment System) etc.
  9. Following provisions have been proposed in Finance bill, 2019:
  • TDS (Tax Deduction at Source) of 2 percent on cash withdrawal exceeding INR 1 crore in a year from a bank account to be levied.
  • The business establishments with an annual turnover of more than INR 50 crores shall offer low-cost digital modes of payment (BHIM, UPI, UPI- QR Code, etc.) to their customers.
  • No charges or merchant discount rate shall be imposed on customers and merchants. Costs shall be absorbed by banks and RBI.
  1. Following provisions have been made in other recent Finance bills.

A new section 269ST was inserted in the Income Tax Act through Finance Act 2017, which imposed restriction on a cash transaction and limited it to Rs.2 Lakhs per day. It restricted any person from receiving an amount of Rs 2 Lakh or more either in aggregate in a day from a person, or against a single transaction or against a transaction pertaining to one event or occasion.

  • In case of violation of above rule, the violator will be liable to a penalty of an amount equivalent to the amount of transaction.
  • Receiving or repaying Rs 20,000 or more in cash for transfer of immovable property can invite tax trouble or penalty. It is to be noted that in the above mentioned situations the receiver of the cash is liable to be penalised and not the payer.
  • Section 40A(3) of the Income Tax Act pertains to cash transaction limit for expenditure made in cash for businesses. Under this section, if payment for any expenditure of over Rs.10,000 is made in cash, then the expenditure will be disallowed under the Income Tax Act.
  • Under section 43 of Income Tax Act, if a payment of more than Rs. 10,000 is done by a person (assessee) for acquiring an asset by cash, the expenditure would be ignored for the purposes of determination of cost of acquisition of the asset, which means capital gain tax impact will be more. Hence, it is important taxpayer make all payments for acquisition of an asset to the seller through banking channels.
  • Section 269SS prohibits a taxpayer from taking/accepting loans or deposits or a sum of more than Rs.20,000 in cash. Barring a few exceptions, all loans and deposits of more than Rs.20,000 must always be taken through a banking channel.
  1. Other Measures:
  • Income Disclosure Scheme 2016
  • Prime Minister Garib Kalyan Yojna
  • Amendments in Money Laundering Act
  • Aadhaar linking of bank accounts



While major benefits have already been discussed above, we discuss herebelow the most significant benefits of demonetization.

  1. High denomination notes have been brought down by about Rs 6 lakh crores.
  2. As on 27th October 2017, currency in circulation (CIC) was lower by 8% on year on year basis as against an increase of 17.2% in the previous year. It represents a net decline in CIC of approximately 20%. This is a sign of Less Cash and Digital India.
  3. As per RBI Bulletin Nov. 2017, approximately Rs 1,60,000 crs was deposited in demonetized currency in PMJDY type small accounts, unmatching to their profiles. After demonetization, 2.24 lakh shell companies have been struck off. It is in the notice of the Government that 35000 companies transacted Rs 17000 crs through their 58000 bank accounts. These irregularities are being scrutinized. The work is on. It is expected that after the closing of scrutiny, a huge sum of black money will be confiscated, culprits will be brought to books and nation will be benefited with this money.
  4. Curbing Terrorism: Stone pelting incidents in Kashmir reduced to a great extent. As per report of Economic Times dated 07.01.2017, terrorism related violence in Kashmir saw a sharp decline of nearly 60% during December 2016 with just one bomb blast in valley during the month. It also reported that two main Pakistani presses engaged in printing counterfeit Indian currency have been forced to shut shop.
  5. 62 lakh counterfeit notes have been detected since demonetization.
  6. New tax payers have increased by 26.6% from 66.53 lakh in 2015-16 to 84.21 lakh in 2016-17.
  7. Financial Inclusion: Since demonetization, 5 crore new accounts were opened under Pradhan Mantri Jan Dhan Yojna (PMJDY) by October 2017.


  1. Finance Bill 2017 prescribed that not more than Rs 2000 (earlier Rs 20000) can be accepted in cash by political parties. It is a very good initiative against black money. It should be augmented with another norm that no political party can accept cash receipts more than 1% of their total receipts, lest manipulation through multiple cash deposits of small amount should take place.
  2. Benami bank accounts should be confiscated. It can be done by implementing 100% Aadhaar based e-KYC. Before this, Aadhaar card should be issued to each and every Indian.
  3. Curbing Benami properties: For this, following steps should be taken.
  4. Registration of properties should be electronic and verifiable.
  5. Chain of transfer of a property should be verifiable electronically.
  6. There should be a central record keeping agency for the properties.
  7. All properties should be linked to Aadhaar Number so that it may be ascertained at any point of time what properties are in name of a particular person.
  8. Rationalizing deemed profit on turnover (Section 44AD of Income Tax Act), so that businessmen may not be encouraged to hide sales on this count. Presently, it is 8% (6% if some conditions are fulfilled) of turnover.



As discussed above, accepting cash worth Rs 2 lakh or more in aggregate from a single person in a day or for one or more transactions relating to one event or occasion will lead to violation of cash transaction law since 01.04.2017.

It is suggested that this limit should be gradually brought down to Rs 5000 and efforts should be made to take it to zero. Then real cashless India will happen. If this (bringing down to Rs 5000 or zero) is done, the Nations will reap following benefits.

  1. Any person will be able to consume his big sums of money, only if it is in his bank account.
  2. Corruption will be minimized to the level of eradication, as bribery is mostly in cash, which will then not be of much use. So people will understand that there is no real benefit in being corrupt.
  • Nobody would like to spend his energy on earning/generation of black money, knowing that he would not be able to utilize/consume it. People will understand that cash will be rotten in their shelves but it cannot be spent. In such a scenario, they will prefer to pay taxes and earn all incomes in white, which will appear in their accounts and will be usable for them.
  1. Lavish marriages will be discouraged. It will also save environment, as a lot of wastage will be avoided. In lavish celebrations, wastage is prominent in form of electricity, water, food, fuel etc.
  2. Prices of real estate will be corrected, as due to reasons narrated above, people will stop demanding black money in real estate transactions.
  3. It will control crimes with money motive, as money received in such crimes is usually cash, which will be near useless for the criminal.
  • Transaction limits will be reduced by banks, as a result of less need of cash among customers. ATM cash frauds will be minimized, as fewer people will be using ATMs.
  • It will increase revenues to the exchequer, as all the business turnover will appear in accounting books of the firms.
  1. This law will have several positive effects. It will be a panacea for eradication of black money and corruption. It will target usage of black money rather than generation of it.



Thus, we observe that Government has already done a lot to curb the menace of corruption and black money in recent few years but there is scope for a lot more. A few solutions have been suggested above but their success will depend on the fact that each citizen takes pledge to cooperate in the efforts of the Government and recognizes the good intentions of the Government. People must appreciate the policies and rules which are made for their own welfare.

(The views and opinions expressed in the article are author’s personal opinion and not of his employer company.)

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