Digitalization and black money

One of the leading issue of our time is black money and a major development is the emergence of various digital platforms as anti-black money tools. Digitalization of financial transactions is a revolution that helped the policy makers to fight black money. Following are the key dimensions related to digitization and its ability to counter black money.
Digitalization is not just the increasing use of digital payments, rather they also comprise digital recording of financial transactions that helps authorities to monitor and check the movement of money.
Digitalization of financial transactions ties and records every transaction in the name of an individual and thus helps the authorities to track and verify the transactions in future.
So, in the fight against black money, digitization acts in two ways:
Digital payments which are highly formal and
Digital recording of financial transactions and their back up with Aadhaar and PAN.
The base for digitalization of financial transactions is the Aadhaar unique id that registers each transaction in the name of a specific individual.
The government has enacted several legislations that require mandatory digital transfer of money while executing payments.
For example, advance above Rs 20000 is prohibited under the Income Tax Act.
Payment above Rs 20000 should be made through banks with supportive identity proofs for making payments to business deals.
Savings above Rs 50000 need PAN
Every bank account has to be linked with Aadhaar. This helps to avoid multiple accounts of people in various banks and thus curtails illegal transactions.
The Aadhaar-PAN linkage gives maximum disclosure about the individual to all authorities including the Income Tax Department. It helps the tax authorities to track transaction and check the income tax profile of the individual/entity.
Higher denomination savings should be supported by statements about the source of money by the depositor.
Mandatory digital payments during high denomination deals prevent the use of physical cash use and thus black money.
Digital banking helps cashless economy, formalization of financial activities and thus reduces the circumference available for black income to be active.

January 6, 2018
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