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Watch the video at the end of the article to know how unaccounted money is converted into tax-free long term capital gains
The Securities and Exchange Board of India (SEBI) has set anti-money laundering guidelines to put in place stronger checks against possible laundering of funds through capital markets. Despite the regulations in place, SEBI recently sought help from various investigative agencies under the finance ministry on alleged money laundering in listed companies. According to reports, the markets regulator had written to the finance ministry, highlighting the method used by certain low-value companies to evade taxes.
The quantum of the alleged tax evasion is said to be pegged at Rs20,000 crore.
Moneylife has published several articles in the past on how money launders operate and the need for proper regulations. Read: Low-risk bank customer accounts can be a conduit for money laundering (http://www.moneylife.in/article/38547.html), Football and cricket most susceptible to money laundering (http://www.moneylife.in/article/36919.html ),Why financial institutions should comply with anti-money laundering laws (http://www.moneylife.in/article/33471.html) and more here (http://www.moneylife.in/?imageField.x=0&imageField.y=0&cx=012932029967637413115%3Aroup7yt0ras&cof=FORID%3A9&ie=UTF-8&q=money+laundering)
How exactly does the laundering take place, using the exchange platform to convert black money into white. Here’s how.
Ambareesh Baliga, managing partner, Global Wealth Management, Edelweiss Financial Services, explained this at a Moneylife Foundation event. He described the modus operandi of money laundering through listed companies. Mr Baliga, who has about 25 years of experience in the stock market, explains how a person reroutes his money through foreign investments in illiquid stocks which are manipulated by operators.
Such manipulative trades involves an entity seeking long-term capital gains exemption by approaching an operator, who finds out an illiquid stock on the exchange platform and gets an allotment of shares done to the entity. Over a one year at least period the operator rigs the stock price up to a pre-determined level. This is when the foreign entity gets in, and gullible investors get in taking the stock higher as the earlier entity gets out. This enables conversion of unaccounted money into tax-free long term capital gains. Watch the video:
From Moneylife Foundation programme on 28 February 2014.
After years of neglect, Railway Minister proposes SPV to revamp Mumbai's ailing rail network
With the coming of the NITI Aayog, will it be a Planning Commission by another name or is it indeed a new way of looking at national idea?
On the first day of 2015, the Union Government announced the establishment of NITI Aayog, i.e., National Institution for Transforming India – the revamped version of the erstwhile Planning Commission. With the Prime Minister as the Chairperson, NITI Aayog will have a Governing Council consisting of Chief Ministers of all States and Lt. Governors of Union Territories. There will also be a Vice-President appointed by the Prime Minister.
This is a significant departure from the structure of the Planning Commission, which had the Prime Minister as the ex-officio Chairman and a nominated Deputy Chairman. The Commission reported to the National Development Council consisting of the state chief ministers and Lieutenant Governors of Indian territory.
Establishment of NITI Aayog may be seen a step forward in giving individual States more say in the policy-making process. According to the Press Release issued by government, “The centre-to-state one-way flow of policy, that was the hallmark of the Planning Commission era, is now sought to be replaced by a genuine and continuing partnership of states.” NITI Aayog seeks to serve as a “think-tank” to “to provide a critical directional and strategic input into the development process”, the release read.
Along with the Chairperson, the Governing Council and the Vice-President, NITI Aayog will have a CEO, full-time Members, 2 part-time members from research organisations of leading universities (on a rotational basis) and 4 ex-officio members nominated by the Prime Minister from the Union Council of Ministers.
Moreover, there will be Regional Councils set up on need-basis to address specific issues, comprising of Chief Ministers/Lt. Governors of the concerned regions. These will be formed for a specific tenure. This particular aspect may not really be a change from the structure that existed before, as the Planning Commission also formed separate panels for consultation to address inter-state issues.
Under the Resolution stated in the press release, there seems to be a focus on “cooperative federalism” and a “Bharatiya approach to development.” which involves “the active involvement of States in the light of national objectives”. There is also thrust on rural development, increased use of technology in governance as well as the ulitisation of the “geo-economic and geo-political strength” that we have in form of the huge NRI community.
With respect to the key objectives for NITI Aayog stated in the Press Release, there is an increased emphasis on the monitoring and implementation of the programs and initiatives along with the aforementioned focus on involvement of States in policy development. It also suggests a reduced involvement of the Centre in industry and service sectors, their role being restricted to policy making, regulation, and enabling legislation.
How effective this widening of focus and the shift from a top-down approach is, remains to be seen.