[Chetan_Rao]

Originally Posted by asingh1977

It is a roundabout question.

Why are what we are..? ....

You have a knack of answering your own questions

I don't blame govt for being dishonest. They didn't drop out of the sky, they're citizens just like us so we the citizens are the govt. ultimately and the corruption is ours too.

Trying to take the path of least resistance/difficulty is a natural tendency that isn't limited to humans alone, just look around and there's an example of that pretty much anywhere you look.

What would we rather have? Simple comprehensive laws diligently enforced, or complex laws that are neither practically understandable nor diligently enforceable?

I keep thinking back to the golden rule of writing user manuals. The best user manual is the one the dumbest of customers can follow to achieve the intended end result. Something I believe is applicable to every organised endeavour, including governance.

[sachinpk]

Originally Posted by hillsnrains

Even after December 30th, one can go and deposit old currency in their accounts @ selected RBI counters.

With an affidavit declaring the source of income etc. etc. My gut feeling is that we may see (or rather hear) lots of business big wigs within India opting for this route. Many were hoping to see such people queuing up in banks, but that is too high a hope.

[navin]

Originally Posted by ecenandu

Yes, based on income tax raid done over years.

Attachment 1578555

Source: Black money, white paper 2012, Ministry of Finance

That said the 6% number is actually lower because the numbers in the chart do NOT include any assets that are outside India (Forex, Gold, Real Estate) and in many cases value real estate at the Buying (Agreement) value (especially if registered) and not Current Market value.

On another note:
Yes a certain portion of the Indian populace has been inconvenienced. That most to them are patiently cooperating with this "transition" speaks volumes for the PR of Mr. Modi and the stoic tolerance of the Indian population the later probably fueled by an intense desire to root out "black money".

Meanwhile this phenomenon has given rise to a million arm-chair economists from socialist (read as biased) JNU professors, to (the otherwise silent) Dr. Manmohan Singh (whose views are now more political than fiscal), to Mr. Palaniappan Chidambaram (who is not only a politician but also practiced law both before and after his HBS stint - it is anyone's guess as to which courses he did at Harvard), etc...

For the record our current "finance" minister is also a lawyer by profession. Perhaps Mr. Rajan was right when he said "In our country, there is a tremendous need for capable economists" Source: http://www.business-standard.com/art...2900022_1.html

[ritz3645]

Demonetisation is only part of the package.

Next step is seeding of Pan and Adhar in RE transcations. Plus ecard as Property Title.

So Taxman has more info and details of Pan holder.

It is more like cluster bomb approach.

[sachinpk]

Originally Posted by ritz3645

Demonetisation is only part of the package.

As there is a saying in Malayalam which means "The father has just gone to cut a small tree branch. The actual beating (using it) is yet to commence".

From what I hear, next in line would be the Real Estate segment. There are already laws which were passed at the central level, which puts on lots of responsibilities on the builders (including payment of penalty for late delivery). They also would not be able to divert funds from one project to another. The real estate sector in many parts is already kind of tottering.

You may never know, Gold could be another area which the current government has in its target. But if unaccounted wealth is made accountable in any manner, I feel it is overall better for the economy.

[navin]

Originally Posted by ritz3645

Demonetisation is only part of the package..

It would have to be just ONE step. By itself even the most pro-Modi people would agree that demonetization would have limited efficacy. As a FIRST step in a series of steps it would be far more effective.

It is obvious that the GOI/PMO's choking of "cash on hand" is to drive a greater part of the "cash" economy towards cashless. These 50 days are like "training wheels" on your first bicycle. aka learning to live without "cash".

My wife and I are both on the wrong side of 50. We have parents who are on the wrong side of 80 as well as other seniors (those over 75) in our circle of friends. We are learning to use PayTM and Scootsy and finding all sorts of ways to work with either plastic or in denominations of 2000 (running accounts at chemists and other vendors). Last Sunday I paid my barber for his services (including his tip) via PayTM. I felt like I had scaled Mt. Everest and a genius when I managed to install PayTM on my wife's orthopedic's mobile phone. Now the good doctor can use PayTM to receive payments. Eureka!

I envy the younger crowd who are already "credit literate". So to the younger set here, if you see any grey haired people struggling with this "new universe" please assist them. Thanks.

Originally Posted by sachinpk

As there is a saying in Malayalam which means "The father has just gone to cut a small tree branch. The actual beating (using it) is yet to commence"..

[alpha1]

Originally Posted by sachinpk

Okay, so the people who have hoarded money (got through illegal means) would just then walk into the bank and ask for the new currency note, in exchange of the old.

The next excuse would be that every one in India (who deals with money) does not have a bank account. And that asking every one to open an account is a big big crime.

If you happen to notice, sairamboko has posted just above you: http://m.economictimes.com/news/econ...paign=ETFBMain

What does this mean?
It means exactly what I said, since banks are the sole means of disbursing cash currency printed under RBI, making the bank account mandatory makes it easy to start tracking the PAN and associated transactions.

Infact the Govt's exhange mela should've stopped long time back - since much of the tainted notes have already been whitened.

The only real opposition I can forsee is from people who are waiting for "Sharia banking" and refuse to merge with the mainstream banking.

How do you propose for this currency's path to be traced? We are in this mess (of black money) because there were lots of people who did NOT want to see any proper accounting of their money. And those people include your friendly neighbourhood realtor, super market owners & all the way to terrorists and money counterfeiters.

Audits by Indian Revenue services. Money is always paid against some goods or services transaction.
If you are looking for a magical way - if we all move to crypto-currency, it can be done.

Originally Posted by JLS

How this could be done - any suggestion?

Only way is via regular audits. Surprise detailed audits. We all know that the major "source" of "black money" is under invoicing of goods and services and movement of foreign transactions is via over invoicing.

Once everyone is on PAN, computers can do the work of million humans at once.


I think my words have not been taken in the right context.
The aim of Govt is to bring everyone under PAN. And every transaction via bank.
It doesn't matter whether you phase out currency by 31st Dec, or by 31st Mar.
The only problem is that announcing sudden demise lead to some hardships that could've been avoided.

[ptushar]

Originally Posted by navin

Last Sunday I paid my barber for his services (including his tip) via PayTM. I felt like I had scaled Mt. Everest and a genius when I managed to install PayTM on my wife's orthopedic's mobile phone. Now the good doctor can use PayTM to receive payments. Eureka!

This is great Navin. I truly believe that this is the way to go for us. We need to drive this behavioral change in India.

Incidentally, have you heard of UPI (Unified Payment Interface), the payments gateway created nu India's National Payments Corporation of India (NPCI). If you like mobile wallets, then you will love UPI. For more information click here. This was launched in April 2016 and today has appx 23 participating banks. This is way way better than any mobile wallet. Just use it once and you will see how powerful this really is.

In a nutshell:
- You need to download the mobile app for the bank you have your account with. (E.g. HDFC bank provides UPI interface through its mobile banking app, ICICI provides it through its 'Pockets' app)
- Once you have the app, you create your UPI profile for your account.
- You will need to create a UPI address called VPA (Virtual Payment Address), which is like an email address. (E.g. you can create <firstname>.<lastname>, amit.khanna, supremetailors, kapilrestaurant etc)
- The final VPA address created will be based on you the bank you have your account with (E.g. amit.khanna@hdfcbank, supremetailors@icic or kapilrestaurant@pockets)
- You will then create am MPIN, which is like your ATM Pin. This is a 4 digit numerical code
- Once this is done, you are good to go and make payments
- To make a payment, the person to whom you will make a payment will need to give their VPA to you. Similar to when you write an email, you need to know the email address of the person you are sending the email to.
- They will NOT provide their bank account details. Just the VPA
- So from your app, you will type their VPA address. The system will immediately show you the name on the account. (E.g. A person called Amit Khanna created a VPA called supremetraders@hdfcbank. As soon as you enter this VPA, the app will show you the underlying name i.e. Amit Khanna. So you know that you are sending the money to the correct person)
- Next enter the amount and the MPIN and your money will be transferred immediate from your bank account to his/her bank account.
- You will get an SMS and the receiver will get an SMS
- The transaction is done.

This will actually send money directly from bank to bank. Works really well.

[perty]

Originally Posted by carwatcher

Latest news floating is that the Govt would put Tax rate of 60% on unexplained money in bank, isn't that an undeclared Amnesty scheme with higher rate. IMHO it would further increase some deposits as there would be many who would like to buy the peace of mind rather than lose their sleep over how to convert their black money lying in cash.

If those with un-accounted wealth (such as businessmen under reporting income) really wanted peace of mind, wouldn't they have paid the applicable tax rate like all other honest citizens before the IDS came into force ? Or wouldn't the corrupt Govt. employee who has no legal explanation for his wealth, paid 45% and slept peacefully after the IDS came into force ? What prevented them from going in for those schemes to gain peace of mind ? It would have probably been fear of harassment by the IT authorities or the confidence that come what may, they'll get away with it.

Now they have to pay 60%, so instead they will choose to lose 30% as commission and find other avenues to convert. Such practices are going to continue till the day there is a provision to deposit the money into banks and incur the 60% penalty. Ample time for this, as of today.

Only when they are left with absolutely no option other than to deposit the cash into the bank, will they bite the 60% bullet, but till then it would be 'convert all you can'.

I've not seen with my own eyes all this happening, but learnt from others/ seen on TV that :
a] The day's collection in bus depots is being exchanged at night for banned notes in return for valid notes if you know the depot manager
b] Same for petrol bunks which refuse to accept banned notes from customers (though they are supposed to). Newly collected cash is exchanged for banned notes if one is on good terms with the pump owner
c] Bank managers exchanging old notes for new ones on the sly to their cronies.
d] Advance cash salary payments to employees for the next few months by small industries/colleges

Obviously this is just the tip of the iceberg. We'll never know what other devious ways were employed.

So it does look like multiple avenues have been found to convert. How much is the nation really going to benefit at the end of all this ? Was it worth the hardship to everyone, even loss of life in some cases, to catch some (probably very few) of the corrupt.

[navin]

Originally Posted by ptushar

- To make a payment, the person to whom you will make a payment will need to give their VPA to you..

Slow down son. You just gave me a heart attack. My current (pre Nov 8th) method.

1. Ask my accountant to make check for cash we need for the month (usually 20-40K)
2. Sign check
3. Accountant sends someone to bank and draws cash and gives me cash and takes signature that I have received cash.
4. I distribute half to wife and keep half and then spend cash.

What if the person or vendor does not have a VPA account? How do I know if they have a VPA account? Why not use the mobile number like PayTM? Long names like "supremetailors, kapilrestaurant" will be difficult for those who don't have English as a first language. And more complicated if we use all regional languages. A series of numbers is easier.

The eradication of "black money" from the system is going to involve more than just Amnesty schemes. There exists sections of society who do not EVER want to declare ALL their income. Part of their rationale is grounded in the FEAR they have of undue harassment from the ITO. And in this regard the fear is not totally irrational. So if "eradication" is the goal, along with all the methods the GOI/PMO introduce to choke forex, gold, real estate, and other avenues, they would also have to retrain the entire Income Tax Department in treating the population as "innocent until proven guilty" and not the other way around.

[sachinpk]

Originally Posted by alpha1

It means exactly what I said, since banks are the sole means of disbursing cash currency printed under RBI, making the bank account mandatory makes it easy to start tracking the PAN and associated transactions.

For the current demonetisation drive this was not possible. Because there would be strong opposition that "people are forced to open bank accounts. This is against democracy". And it may land up in courts and takes years to resolve. In the mean time every single black money hoarder would realise what is going to happen and plan for it. Let this demonitisation drive stabilise, there would be a steep rise in working bank accounts.

Infact the Govt's exhange mela should've stopped long time back - since much of the tainted notes have already been whitened.

The govt. had to come with this "exchange mela", because the opposition would other wise cry that "poor people with 500 and 1000 could not even exchange their money". The current government is not getting any cooperation from the opposition (or some times even the judiciary), but still it had to do what it has to do. The government and RBI knows how much of black money can really be whitened using this scheme.

The only real opposition I can forsee is from people who are waiting for "Sharia banking" and refuse to merge with the mainstream banking.

Those people would then have to figure out how best to destory Rs.500 & Rs.1000 notes after Dec 31st. Tearing up, or burning which would be more simpler .

Audits by Indian Revenue services. Money is always paid against some goods or services transaction.

Audits happen based on some records. What if these records itself are tampered with, or not even maintained? In case of real estate, land prices are shown ridiculously low in the records (which the auditors rely on) in order to reduce registration costs. And a share of the costs are paid in liquid cash. Same goes with shop keepers, super markets who can always undervalue their sales, and pay lesser taxes. But I understand that GST may soon change this practise (of shop keepers).

The only problem is that announcing sudden demise lead to some hardships that could've been avoided.

Agreed inconveniences are there. But without the sudden killing of Rs.500 & Rs.1000 things would not have got any good results. Black money hoarders in India, are not fools. If they know how to make dirty money they know how to keep it as well. So giving them good time to think of alternatives, would kill the whole plan. Even in this chaos, a Delhi based businessman figured out that people in North Eastern states did not have any Income Tax, and banks were quite relaxed there. He tried giving a Naga liquid cash, and asked him to do an RTGS from Nagaland. The Naga and the businessman are now sitting in a lock up, figuring out what went wrong.

[Sawyer]

Originally Posted by navin

if "eradication" is the goal, along with all the methods the GOI/PMO introduce to choke forex, gold, real estate, and other avenues, they would also have to retrain the entire Income Tax Department in treating the population as "innocent until proven guilty" and not the other way around.

I agree, but there are important precedents to this and one big issue:
Precedent 1: A much more honest government that does not cheat us by squandering our taxes by the enormous waste it is today guilty of. And of dishonestly building infrastructure that is always inadequate, and always breaking down. Today, I hate paying my taxes, because the larger part of it is eaten by parasites in government, that feed on us like leeches. I pay in full, because I have no choice, or because I am a coward.
Precedent 2: A tax law that is streamlined and simple to the extent necessary to encourage people that are otherwise honest, to not be dishonest in their tax obligations and to not be a breeding ground for dishonesty. You want to have zero cockroaches in your house? Have a spotlessly clean kitchen, no amount of the stick of Hit spray or the carrot of Gels will have that enduring effect.

Finally, and the elephant in the room: who will train the IT department? The same people that have launched this current calamity? They don't subscribe to the innocent until proved guilty philosophy. Do you really think that the Indian State operates in that mode for many many years now? We are all now guilty of some crime or the other, until proved innocent. Unless you are politically well connected of course, when your accuser is assumed to be the guilty one. Or unless you are wealthy enough to get a savvy lawyer.

PS: to raise at least some cheer, what I read today as a satire on the famous app survey, as multiple answers to the question:
Is the demonetising exercise being properly executed? Choose from, for the quality of execution:
1. Perfect
2. More than perfect
3. Not imperfect at all
4. Amazing

[sdp1975]

New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits :

http://economictimes.indiatimes.com/...w/55616167.cms

Can honest taxpayers look forward to any "schemes" in next years budget ?

[ptushar]

Originally Posted by navin

Slow down son. You just gave me a heart attack.

I can relate to your method of payments; this is what was the prevalent method for a long time and even now for many people.

Actually VPA is just a fancy term. Let me list out why India's UPI is so good:

1. You don't have to share your bank account number with anyone. Many people are not comfortable in sharing their bank account details
2. You don't even have to share your mobile number with anyone. Many people are equally concerned about sharing mobile numbers with strangers
3. In case of payment wallets., the sender and the receiver, both have to have the same vendor's wallet for completing a transaction. E.g. in case of PayTM, you and the receiver must both have PayTM.
4. Since PayTM is a wallet, you first need to transfer money from your bank to PayTM and then you need to transfer money back from PayTM to your bank.
5. Till the time the money is with PayTM, it gets no interest accumulation. While your money in the bank does get interest on it
6. In case you are using PayTM and the person you want to pay does not use PayTM, then you can anyways not complete the transaction

Taking this further, assume that you sign a cheque and give it to me. You will at the least have to ask the name on which the cheque has be made. Suppose the name on my bank account is "Rupesh Traders Pvt. Ltd.". Unless you write this correctly, your cheque will never be encashed. Hence you will have to ask me exactly in what name the cheque has to be made. Its the same with VPA. You will ask me, what's my VPA and then enter it exactly that way on the app. E.g. Rupesh.Traders@hdfcbank

Furthermore, say you want to send me an email. At the very least you will need my exact email address. Say my email address is Rupesh.Traders@somemail.com. Then, unless you enter this exactly, your email is never going to reach me. So you will have to have my email address with you, for you to send me an email. The same argument holds good for a mobile phone number as well.

Similarly, when you want to pay me, I will provide you my VPA, which you will enter and I will instantaneously get the money straight into my bank account. It's exactly the same as giving a cheque. You can say that it's a digital cheque.

The most important thing here is:

• I don't have to disclose my bank account details to you, just my VPA (Same as in cheque payment, I don't tell you my bank account number, just my name on the account)
• I don't have to disclose my mobile number to you
• I get the money credited absolutely immediately
• I don't have to keep money locked in any wallet, and lose interest
• Lastly, your bank account can be in any bank while mine can be in a different bank and yet we can send money to each other (Exactly like a cheque payment method)

Trust this makes it more clear.

PS: I don't have any business in the name of Rupesh Traders. Any similarity with any business of this name is purely coincidental.
PPS: I don't work for NPCI
PPPS: I actually love PayTM and use it regularly. I have nothing against PayTM or any other wallet. In fact once the Payment banks come into existence in India, then they will also be able to provide interest on the deposits made. PayTM has also been granted a Payment Bank license by RBI

[sachinpk]

Originally Posted by sdp1975

New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits

Brilliant!! There has been really huge deposits in the Jan Dhan accounts which were meant to be used by the poor. Ideally only their subsidies (and basic savings if any) could have landed up there. Now black money hoarders had used these poor people to put black money on these accounts.

When things stabilise, a block would be set on the Jan Dhan account (just like minimum balance). To keep the "poor man" from acting smart, the govt. can ask him to prove how he made so much money in the first place. They will have to keep quiet.

So the government manages to use the ill-gotten wealth in Jan Dhan account to be used for the next 4 years. The black money hoarder can do zilch, as the "poor man" does not have any money to pay him back. He will have to beg the poor man after four years, to repay the money. In the mean while if the "poor man" vanishes from the scene, that is even more fun!

My gut feeling is that in next year's budget there could be some minor reduction in income tax slabs, and a slew of big public infrastructure projects (highways, bridges, new railway lines etc.).