Before we get into the details on how to convert black money into white money legally we need to first understand what it is and where it comes from. In my view, 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?
1. Corruption
2. Sale of property
3. Sale of goods/services without invoice
4. Accounting for fictitious expenses
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.
How is it converted?
1. Showing fictitious sales
2. Increase the sale price of an asset
3. Gifts from relatives and friends on occasions
4. Sale of Gold and Diamonds
5. Agricultural Income
6. Money Laundering
Now I will introduce the avenues for spending black money in black to everyone.
1. Investing in property
2. Spend on weddings and functions
3. Buying goods/services where the identification is not mandatory
4. School fee and donations
5. Buying gold / precious metals
6. Elections
All in all, one good example where the black money market situation is epidemic is mostly in third world countries and in second world countries such as in Africa, Asia, South America and in some European countries. India currently tops the list for illegal black monies in the entire world, estimated to be almost US$1,456 billion stored in Swiss banks in the form of unaccounted money. According to the data provided by the Swiss Banking Association, India has more black money than the rest of the world combined. Indian Swiss bank account assets are worth 13 times (1300%) the country’s national debt, and, if this black money is seized and brought back to the country, India has the potential to become one of the richest countries in the world. Allegations of Indians holding trillions in black money in Switzerland are, however, in dispute.
Disclaimer: This article wasn't intended for readers to follow any of these methods for black money conversion. This article is just for exposing loop holes of our system. If I have missed any other methods which people use to convert their black money into white money I request you to share it in the comment section.