Investment in hundreds of unlisted firms are under the government's scanner for funnelling thousands of crores of black money into the legitimate financial system through instruments, which authorities suspect are being used to obscure the source of slush funds.
A pilot survey by the tax authorities reported many instances, particularly in real estate and construction, where companies were borrowing money through "cash" through financial instruments such as "convertible debentures" and "optionally convertible debentures" from scores of investors.Convertible debentures are instruments through which an investor exchanges the funds that he had lent into equity at a later date, making them legitimate shareholders of the company.
Since these are unlisted companies, the disclosure norms aren't as stringent as these don't come under the Sebi's scanner. There are about 40,000 unlisted companies in India.
The survey showed more than a third of India's black money transactions are believed to be in real estate, including secondary market sales between individuals.
The finance ministry carried out a pilot analysis of tax evasions from data compiled by the I-T department's investigation wing last December.
About a third of this (Rs 1464 crore) was unearthed from real estate, about one-fourth (Rs 1180 crore) from manufacturing sector and about 15% (Rs 645 crore) from the mining sector.
The authorities also suspect many entities to be using "private placement programmes" offered by overseas venture capitalists to introduce dirty money into the legitimate financial system.
High net-worth individuals park money with venture capital funds by depositing money in foreign banks, which are then used to profitably trade in both stock and commodity markets, besides investing in sectors such as real estate by taking advantage of an opaque regulatory architecture.