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Old 17th November 2016, 12:20   #856
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

Two experiences today:

1. Went to Mahindra service center for 50K service. Saw an unusually high number of cars in the compound for a weekday. When I spoke to my RM, he showed be a bunch of invoices that he has kept ready (some as old as 7th Nov), with amounts ranging from 15K Rs to as high as 50K Rs. The work has been completed, customer notified, but the cars are still parked at the service center as those customers insist on paying with old (and now invalid) notes and the service center not ready to take payment with old notes as they face problems depositing them in banks. Apparently banks have told them they should not be accepting old notes for any invoices from 9th Nov onwards. The RM has been following up with these customers asking them to pay online or even give a cheque. Some customers had the gall to ask him back "why should I pay with white money?" . The service center has initiated a formal communication with these customers that their cars have been kept ready for delivery from so and so date and they should pay and pick up the vehicles. They will wait for another 1-2 days and start charging hefty per day parking charges for these vehicles.

2. Came back home in a OLA. I stay in Mumbai BTW, where you can do cashless payment for practically everything. The OLA driver told me - till about a week back, almost 100% of the customers used to pay by cash. Now, since last 3 days, suddenly everyone has switched to OLA-Money and there is hardly one trip in a day where the customer pays cash. People seemed to have adapted to the new situation pretty fast.

Last edited by SDP : 17th November 2016 at 12:23.
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Old 17th November 2016, 12:20   #857
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Originally Posted by kiku007 View Post
People with unaccounted money would have bought Real Estate, Gold, Diamonds, Cars etc. for about 10L Crores in 20 days
What makes you think that the same is not happening now. I call this policy a redistribution of black money and not a destruction of black money. People have converted their money into gold and other things. Also the rate for simple exchange to new currency is around 40% in delhi right now. What is this achieving? End of black money? You wish. All it is doing is that a person is only left with 60% of his black money with the rest 40% gone to person B who is exchanging his currency for a 40% commission. It goes without saying that he would not be declaring it as his income when he files his ITR. 😂
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Old 17th November 2016, 12:26   #858
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Originally Posted by sgiitk View Post
I just cannot understand the mad rush for the ₹2000/4500/2000 (from tomorrow) exchange. You could deposit in your account and draw 10,000 (now 24,000) a week, per account. If I have a crore (or even a lakh) how much do I gain by the puny exchange. Zilch.
the servants in our neighborhood have stopped coming in to work because they are getting 2000 per day to keep exchanging 4500 non-stop. They were bank hopping till the indelible ink came into play. Effectively they were laundering it for the Cr club. Assuming they are able to do 6 conversions a day it's still pretty good for the violators.

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People have converted their money into gold and other things.
+1 and this was the reason I was advocating the government should have announced a second round of amnesty albeit at 50-55% penalty rather than allow this redistribution to happen, as you rightly put it!!

Last edited by Eddy : 17th November 2016 at 12:44. Reason: Please use the EDIT or MULTI-QUOTE buttons instead of typing one post after another on the SAME THREAD!
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Old 17th November 2016, 12:33   #859
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Originally Posted by sachinpk View Post
I am also now going to follow the RBI guide line, and only making limited posts on this thread.

The last this was tried out was in 1978 and the notes which got pulled out were Rs.100 (if I remember right).

World War II was to end early when the Brits and US launched "Op. Market Garden". This operation failed, but ultimately Brits and US did win.


But what is happening now is a hard reset, where lots of money made through these shady practises are all getting invalidated. Bribe takers now need to start from scratch.
The problem with the forum format is that all old posts get buried as new ones come, but there is a limit to how long one can repeat oneself, so I am making this my last post here and unsubscribing from the thread.

But while going, a few responses to the above:

1. The 1978 event involved Rs 1000 notes, in limited use by the public. So, while it failed in the medium to long term, the public at large was not inconvenienced at all.
2. Most analysts and historians now agree that Market Garden was ill conceived, with defective intelligence and inadequate appreciation of ground realities like, for example, the single narrow road that British armour had to drive over in just 40 hours to reach Arnhem for the operation to succeed. The Field Marshal Montgomery ego and his driving need to be the first to Berlin led to these shortcomings in the planning of the operation. But Market Garden failed, Montgomery had to thenceforth take second place to the American generals like Patton and others, and the Allies squandered the one excellent chance they had to get to Berlin by the end of 1944 and end the war at a time when the Russians still weren't close to the borders of even Poland. Yes, the war was ultimately won in May 1945, but at the cost of millions of more lives, and in a way that allowed the Russians, by their getting to Berlin first, to dominate all of Eastern Europe including East Germany till 1989, when the Berlin Wall fell down and the USSR imploded. So the Market Garden example may be a good one in this context, which is why I have expanded on it, but for completely different reasons!
3. The hard reset you refer to is only to the extent that black wealth had not moved out from currency notes to other forms. No one really knows the black money in notes as a percent of total black wealth. To the extent it had so moved, bribe takers do not need to start from scratch. And to the extent it hasn't, the beginning have been made already, with the new Rs 2000 notes - see my link in a post above.
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Old 17th November 2016, 12:34   #860
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Originally Posted by diyguy View Post
+1 and this was the reason I was advocating the government should have announced a second round of amnesty albeit at 50-55% penalty rather than allow this redistribution to happen, as you rightly put it!!
I simply can't understand this theory. How can people buy such high amounts of gold and other assets in short period of time? Is there so much gold in black market? Any person with common sense won't sell a good quality asset for bundles of scrapped notes? If they are indeed receiving bundles of old notes how are they going to convert these notes to white? If people are buying land why no spurt in registrations. Most of these reports are just hearsay. Unless there is collusion from banking system, whitening black cash is next to impossible in bulk. There may be small laundering using mules. That also seem to stop now.
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Old 17th November 2016, 12:38   #861
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+1 and this was the reason I was advocating the government should have announced a second round of amnesty albeit at 50-55% penalty rather than allow this redistribution to happen, as you rightly put it!!
My dad is a businessman. So many people in Delhi wished for the same. That with this announcement and a week full of panic following it, the government should now bring back the amnesty scheme with 45% tax. People are anyways losing a similar amount of percentage regardless of whether you buy gold, foreign exchange or exchange into new currency. People will rather gladly pay tax and use their money openly then. This would have been beneficial to government too because they would have earned so much in taxes and also people would then transparently invest money into market without any fear of prosecution.
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Old 17th November 2016, 12:56   #862
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by drmohitg View Post
My dad is a businessman. So many people in Delhi wished for the same. That with this announcement and a week full of panic following it, the government should now bring back the amnesty scheme with 45% tax. People are anyways losing a similar amount of percentage regardless of whether you buy gold, foreign exchange or exchange into new currency. People will rather gladly pay tax and use their money openly then. This would have been beneficial to government too because they would have earned so much in taxes and also people would then transparently invest money into market without any fear of prosecution.
Any particular reason you are aware of on why they did not use the Amnesty Scheme which was available till Sept 30th? Just wanted to understand.
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Old 17th November 2016, 13:05   #863
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Most of these reports are just hearsay.
Sir, no disrespect but because you are not seeing it doesn't mean it is not happening. I know that a neighbor has spent close to 10L on white goods from one store for purchase of UHD tvs, 700+L fridge, Home theater, inverter ac. This is one avenue. Another is lending money to folks at a discount payback. Third is purchase of flat, which is being worked out at this point. Flats are still going at 65:35 ratio of white to black. Gold is something that I have not witnessed though some offers were made for diamond jewelry. Like some else mentioned, there has been a redistribution of money and investment. I don't know how people with 100s of cr of black are doing it but am sure at each level there are enterprising folks who are finding a way out, maybe partially but are able to bypass the situation .
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Old 17th November 2016, 13:18   #864
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Originally Posted by diyguy View Post
Sir, no disrespect but because you are not seeing it doesn't mean it is not happening. I know that a neighbor has spent close to 10L on white goods from one store for purchase of UHD tvs, 700+L fridge, Home theater, inverter ac. This is one avenue. Another is lending money to folks at a discount payback. Third is purchase of flat, which is being worked out at this point. Flats are still going at 65:35 ratio of white to black. Gold is something that I have not witnessed though some offers were made for diamond jewelry. Like some else mentioned, there has been a redistribution of money and investment. I don't know how people with 100s of cr of black are doing it but am sure at each level there are enterprising folks who are finding a way out, maybe partially but are able to bypass the situation .
I am interested to know what exactly is this "way out". People buying white goods may be happening. But that cannot be done on a very large scale. The dealer has to account this in his book. He can show say 10% hike in his sales with out major questioning from the IT. So a minor adjustment may be possible. Lot of the people you are mentioning are falling for "baad mein dhekha jayega" policy. The hawala dealers are not giving money upfront nor promising anything on the money pumped to them. They as everyone are waiting and watching and are promising money back down the line may be after a year or so.
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Old 17th November 2016, 13:21   #865
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by drmohitg View Post
My dad is a businessman. So many people in Delhi wished for the same. That with this announcement and a week full of panic following it, the government should now bring back the amnesty scheme with 45% tax. .
If I remember right there was a three month amnesty scheme till 30/9 . So were they sleeping. No need for any more amnesty. Now let is see what happens when the attack on Benami Property comes!
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Old 17th November 2016, 13:44   #866
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...... without any fear of prosecution.
I don't think they deserve that anymore.
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Old 17th November 2016, 13:58   #867
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Gold, jewelery buying is under strict scrutiny. Some may temporarily escape now, but I am sure this step is just one of the many that will be coming in next few months to nab black money hoarders. PM has already hinted regarding this. This move's secondary motive was more of a punishment for tax evading citizens. They had already been given fair chances/warned, but 'lato ke bhoot baton se nahi mante'.

I am in the middle of property sale/purchase for my in-laws and trust me, builders and property dealers alike, are flatly refusing any cash transactions now (I probed them just to see how much mess they are in!) At least that's the impression I got in NCR.

Buying TV's, electronics in bulk is not a very attractive way to hide black money. These stuff depreciate hard, prone to damage, not to mention it can only be done in smaller scale and is cumbersome.

Last edited by heavenlybull : 17th November 2016 at 14:02.
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Old 17th November 2016, 14:07   #868
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by drmohitg View Post
This would have been beneficial to government too because they would have earned so much in taxes and also people would then transparently invest money into market without any fear of prosecution.
What you are not considering is that, these people who are now asking for new amnesty, are doing so with the benefit of hindsight. Why should government make it easy for these people who willingly did not use the first amnesty scheme?

The government is betting that it will be collecting much more in taxes in this exercise. And if some one still has cash in old notes after Dec 31, it's as good as government getting all of it. That's why the 'ban' on use of these notes except for some exemptions.

Secondly, giving another amnesty would set a precedent and also set an expectation that there can be more such schemes in future.
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Old 17th November 2016, 14:07   #869
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by drmohitg View Post
My dad is a businessman. So many people in Delhi wished for the same. That with this announcement and a week full of panic following it, the government should now bring back the amnesty scheme with 45% tax. People are anyways losing a similar amount of percentage regardless of whether you buy gold, foreign exchange or exchange into new currency. People will rather gladly pay tax and use their money openly then. This would have been beneficial to government too because they would have earned so much in taxes and also people would then transparently invest money into market without any fear of prosecution.
The so called people can still do it. Go and deposit whatever money they have into their bank account. IT will send scrutiny notices only after March 2017. Put these cash into FD or any other instruments to earn interest. Pay tax for these as per norm. If you are able to explain and good to pay the resulting fine, why should you worry. It is not that suddenly after Dec 30th you will see everyone depositing about Rs. 2.5 Lakhs will be caught and put in jail.

When VDIS (Voluntary Disclosure of Income Scheme) was introduced, some politicians quipped it as a "fair and lovely" scheme. Many black money hoarders and the corrupt didn't give a damn about it. So many newspaper articles described how bad the scheme was. And now they all want the scheme back to minimize their loss.
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Old 17th November 2016, 14:09   #870
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Default Re: Government scraps Rs 500 and Rs 1000 notes!

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Originally Posted by sgiitk View Post
If I remember right there was a three month amnesty scheme till 30/9 . So were they sleeping. No need for any more amnesty. Now let is see what happens when the attack on Benami Property comes!
What do you think the next steps will be? Will the Benami property bill be as effective as this one?

On another note, the vicious cycle has started.

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