De-monetisation: From buying gold to giving out 6 months salaries in advance, here’s what people are doing to evade tax net

Indians have always had their way with ‘jugad’, be it with a non-working fan or government declaring a war against black money and banning currency. Indians have come out with the most unimaginable ways to get their old currency converted into new ones and also to escape the tax problem.

As per the reports, a real estate developer in Vadodra gave his 100 employees their six months’ salary in advance in cash. This might look very generous of the employer, but he and many others like him have used this technique as an ingenious way to get rid of their black money, following demonetisation of the Rs 500 and Rs 1,000 currency notes.

"The salary was paid to all those who work for me in advance. Every employee was even given 2% more than their salary for their efforts," the developer told ET.

He now hopes that his employees don't run away with the money.

But this isn’t the only way in which employers in small businesses are using their employees to grid their black money.

Somewhere near Mumbai, an owner of two well known saree showrooms somehow convinced his 25 employees to deposit a total of Rs 40 lakh in their bank accounts in the next few days.

"The employees, many of whom don't even pay income tax, would deposit the money in their bank accounts. They would withdraw the money a month or two later and return it to the shopkeeper," a middleman who facilitated the deal, told ET.

But the problem for both the developer and the shopkeeper continue to persist as they still need to get rid of a couple of crores till 31st December or the money will be of no value. This problem has led to the mushrooming of middlemen across the wwhole nation and they are charging in between 10%-30% commission for converting high denomination notes to smaller ones.

Another popular way opted to dispose of the illicit cash is to buy gold. Jewellers or middlemen who sell gold are charging anywhere around Rs 40,000 for 10 grams when the market rate was Rs 30,500 on Wednesday.

"Whenever someone gets black money he is not going to just store it in his house, he will invest it or spend it. The problem is for those who held that money at 9 pm on Tuesday," a Mumbai-based chartered accountant told ET.

In some cases many where people were still left with the black money are now turning to god. Many people are going to the religious places and exchanging the Rs 500 and Rs 1,000 notes theu hold for Rs 100 notes.

According to people in the know, many hawala operators and real estate developers who hoarded their black money are now stuck with Rs 500 and Rs 1,000 currency notes.

Most black money hoarders expected the government to de-monetise the Rs 1,000 note, but extending it to Rs 500 came as a shock.