The Supreme Court-appointed special investigation team on black money has called for clamping down on betting in cricket and stringent checks to prevent rampant use of unaccounted funds in educational institutions by way of donations and capitation fee.
The panel has also called for a cash holding limit of Rs 15 lakh to reduce high-value transactions that are carried out in cash to avoid taxes.
Tasked with looking into the issue of black money and slush funds, SIT also asked markets watchdog, the Securities Exchange Board of India (Sebi), to frame regulations for preventing money laundering through trading in stocks and shell companies, dummy firms that mostly exist on paper.It flagged concerns about widespread use of unaccounted black money in India’s stock markets through overseas derivative products, often described as participatory notes (P-Notes).
“The Indian Premier League (IPL) has been marred by betting and spot-fixing scandals and involvement of huge amount of black money,” SIT headed by justice MB Shah said in its latest report. Rules should be drawn to deter those involved in such illegal activities.
Set up in May 2014 immediately after the BJP swept to power, SIT has been filing periodic status reports to the Supreme Court.
“For holding of cash and currency notes, there should be a limit, by prescribing a reasonable threshold, may be Rs 10 lakh or Rs 15 lakh. This would control holding of unaccounted money to a large extent. This would also control transfer of unaccounted cash from one destination to other, which at present is rampant, may be by Angadias or by other means,” it said. Angadias are men who act as cash couriers for traders.
Sebi needed to better identify owners behind overseas investments into P-notes that find way into local equity markets. P-notes, which have opaque registration standards, have been long suspected to be a key instrument to route unaccounted money from overseas tax havens into the legitimate financial system by obscuring the sources of funds.
About 31.31% of outstanding P-Notes invested in India, or Rs 85,006 crore, are from Cayman Islands, a tax haven.
“The Cayman Islands had a population of 54,397 in 2010 according to Wikipedia. It does not seem conceivable that a jurisdiction with a population of less than 55,000 could invest R85,000 crores in one country,” the panel said.
On the education sector and religious institutions and charities, the panel said the tax department should expeditiously finalise assessments, and if necessary, take punitive action. It also called for changes in law to prevent routing of unaccounted money through donations.