Reducing validity of cheques : Delayed step in right direction

Even though attention of Reserve Bank of India (RBI) is being drawn towards menace of misuse of ‘benami’ drafts as carriers of black money for last several decades, step at last is taken to take some corrective measures in this regard when RBI has now decided to reduce validity of cheques and drafts to just three months with effect from 1st April 2012, and banning cash payment of drafts exceeding rupees 20000. But this is not enough. Instead of taking steps in parts, comprehensive strategy comprising all the measures together need to be taken in a bid to end regime of parallel flow of black economy.

Notes of higher denominations of rupees 500 and 1000 are mainly used as unaccounted money. Currency in higher denominations does not exist in most of the advanced countries where most transactions are through banks. India should also discontinue currency in denominations of rupees 500 and 1000. All expenses above say rupees 1000 including salaries must be made through crossed cheques only.

Since property-deals practically have larger share of unaccounted money than that disclosed on papers, tax-laws should be simplified by providing a permanent voluntary-declaration scheme to declare as much income as possible from ‘undisclosed sources’ on payment of maximum tax-slab of 30-percent. This will catch hold of those purchasing property from unaccounted cash when tax-persons will find ‘income from undisclosed sources’ in tax-returns of those selling the property. Circle-rates should be somewhat higher than prevailing market-rates and should be reviewed and fixed after every three months. Stamp-duty should be charged at just two-percent of such fixed circle-rates irrespective of the deal shown on papers. Capital-gain should be reduced to ten-percent instead of present twenty-percent. Idea should be to have such low rates of stamp-duty and capital-gain so that people may volunteer themselves for clean fully accounted property-deals which in turn will give much-much more revenue than at present.