MUMBAI • Indians are inventing ingenious ways to try and hide their money from the tax inspector, as the government attempts to flush out vast undeclared wealth by abolishing high-denomination banknotes.
The shock announcement by Prime Minister Narendra Modi on Tuesday gave people only a few hours to spend or deposit 500- and 1,000-rupee bills before they were abolished, although plans are in place to allow a more gradual conversion to new notes.
Those plans involve depositing old bills in bank accounts, however, where they can be seen and analysed, and, as millions of Indians scramble to convert savings using this method, some with piles of so-called "black money" are looking for loopholes.
Retailers and wedding planners say they have been inundated with frantic calls from people looking to bring forward large-item purchases from anyone willing to accept the old notes.
In Mumbai, a senior marketing executive at an events management company that organises large weddings has witnessed the scramble.
"It has been a stressful day. Wedding clients are going mad," he said last week, unwilling to be named. "One client called and said 'I'll give you 30 million rupees (S$628,000) in (old) 1,000-rupee notes.' There are loads of black money."
Others are looking to line up friends, domestic staff and even senior citizens prepared to legally exchange the cash in small enough chunks to avoid the banks' scrutiny.
Simply declaring the money is not an appealing option for tax dodgers, as banks have to report to the tax authorities anybody depositing over 250,000 rupees.
Other unusual methods of exchanging cash are appearing on social media.
One tweet described how people were paying agents for expensive first-class train tickets with old bills and then cancelling them later to get reimbursed in new notes, all in order to get around the taxman.
The problem of the shadow or "black" economy in India is pernicious. Transactions that take place outside formal channels amount to around 20 per cent of India's annual US$2 trillion (S$2.83 trillion) gross domestic product, according to investment firm Ambit.
REUTERS
