Definition: In India, Black money refers to funds earned on the black market, on which income and other taxes have not been paid. As per various estimates, more than $16.4 trillion of black money from India is stashed away in Switzerland alone.
In a historical move by Finance Minister Arun Jaitley, it has been declared that all financial transactions above Rs 2 lakh will have to mention PAN Card as mandatory requirement. This is one of the biggest step Indian Government has taken so far to curb the outflow and inflow of black money in the country.
This mandatory rule of PAN Card will be effective January 1, 2015.
Last year, Government had fired their first salvo to stop black money circulation by instructing that that all pre-2005 currency notes would be expired.
Replying to a question in Parliament, Finance Minister Arun Jaitley said, “An issue is being raised with regard to black money… Very shortly we will be placing the notification that if you deal in cash of more than Rs 2 lakh, a PAN number would be mandatory,”
Besides, all cash transactions above Rs 50,000 which is used to pay Hotel bills or foreign travel expense will also need mandatory furnishing of PAN Card. For all non-luxury expenses, Rs 2 lakh is the threshold now. At the same time, relief has been granted to small investors as they are not required to provide PAN Card details for making deposits above Rs 50,000 in post offices.
In case an investor or buyer is purchasing gold or bullion above Rs 2 lakh, then PAN Card would be mandatory. Earlier, for gold and bullion purchases, the threshold was Rs 5 lakh.
Here is a chart that shows all the changes made:
During the Union budget, Arun Jaitley had proposed that all transactions above Rs 1 lakh would need PAN Card as a mandatory requirement. This threshold has now been increased to Rs 2 lakh, after several business and commerce communities and MLAs suggested relaxation.
None the less, this is one of the major decisions made by Finance Ministry which will have long term affects in terms of circulation of black money.
Earlier this year, Government had promised that PAN Card would be issued within 48 hours. At a time when only 14% of Indian population has a PAN Card, and only 2.5% file IT returns, a lot needs to be done.
It is heartening to see that Government is taking steps to curb spread of black money in India – The more Black money is curbed, the better it is for Indian economy!