- B. PRABHU VERLEKAR
- Do politicians use casino winnings as a method to convert black money into white money? Is this a commonly adopted practice, and what is the typical modus operandi followed by political figures? From where they get funds? I am writing my thesis for doctorate in ‘Political Funding’. Please guide.
Prof. Vishwas J. Bhagat –Khandola
Casino winnings in India are subject to a flat tax rate of 30% plus surcharge and cess u/s 115BB of the Income Tax Actmaking casinos a costly and inefficient way for laundering unaccounted income. Contrary to popular belief, seasoned politicians and individuals rarely rely on such simplistic methods to convert black money into white.
In practice, seasoned politicians have cost efficient methods of raising, hiding and laundering money. Depending on portfolios and the post they hold, funds are raised by having cuts in contracts, rights in real estate projects in exchange for sanctions and permissions, approvals for extra FARs, regular “haftas” for permitting illegalities mainly in coastal belt, etc.Routes and methods employed for concealment, dispersion, and strategic deployment of funds are unique. This includes holding assets in different layers, throughmultiple tax entities like companies, LLPs, charitable trusts instead of direct ownership; trusted relatives and friends; benami foreign bank accounts; NRE accounts;, undervalued real estate properties.Few years ago, an MLA was given a ticket by ruling Party at Centre. On the last day he filed his nomination as independent candidate and woncomfortably. When raided by Enforcement Authorities, no unaccounted assets were found to the great shock of his tax consultant. The MLA proved to be smarter than his tax consultant.Novice politicians indulge in job scams and get exposed.
The belief that politicians frequent casinos primarily for laundering money is therefore misplaced. Casinos are visited by individuals for entertainmentand excitement to burn black, white, grey, legal or illegal money rather than systematically convert it into accounted income.
The only beneficiary in this ecosystem is the casino operators. They function with the blessings of political establishments and in return they contribute through regular “haftas” and election-related funding, ensuring continuity of business with minimal disruptions. They have successfully avoided stringent regulatory compliances through qualified Gaming Commissioner as per international standards. Also note that politicians achieve all the above at great personal cost by killing their Soul, Conscience, Integrity, Honour, Reputation and Self- Respect. Once out of power,they become object of public ridicule and contempt.
- I am British citizen of Indian origin and hold OCI card. I have taken on lease under management contract, a beach shack at Morjim from a local person which is patronised by westerners mostly Russians and Israelis. Management contract is drafted by an expert lawyer. Local person has all the licenses, permits and registrations to run the business. I am running this shack for past few years by employing trained local people only and have also engaged a local panch member to do liaison work and business is run smoothly without any difficulties.After the recentfire incident at a Club, I want to confirm whether what I have done is legally right.I do not wish to violate any Indian law. I regularly read your interesting Tax column in The
Navhind Times.
PremKumar Singh – Morjim
Thanks for sharing your comments. As a British citizen holding an OCI card, you get privileges like visa-free entry, long-term stay in India without reporting to Police Station but you are still legally a foreign national and as such you cannot engage in business or employment without approval under FEMA and as per RBI Rules. Additionally, and importantly, a beach shack allottee in Goa is not permitted to give the shack to others on lease, sub-lease, transfer or franchise.Under Goa Beach Shack Policy, the allottee must personally run and operate the shack. Consequences of violation will result in immediate cancellation of license and penal consequences arising for violation of FEMA law.
- My close friend who was in need of funds to run his business, has obtained a gift of Rs 20 lakh from his father-in-law through banking channels as advised by his tax consultant since it was tax free being from “specified relative” covered under section 56(2)(x) of IT Act. As per tax returns filed, his father-in-law has no financial capacity to make such huge gift. Can Tax Department issue notice to prove financial capacity of donor to justify the gift?
Hiresh S. Waghela, Betim – Bardez
Yes. Though gifts from specified relatives are specifically exempt from tax under Section 56(2)(x) irrespective of the amount, the assessee must still establish identity, genuineness, and creditworthiness of the donor. Courts have held that mere banking channels and relationship are not conclusive. If the source of the gift is unexplained, the addition can be made in the hands of the donor, which is chargeable to tax at 60% plus surcharge plus cess, effective rate being 78% under section 68 read with 115BBE of IT Act. Further, penalty provisions may apply.
- When New Income Tax Act is applicable? What significant changes are made therein?
Ganesh S. Pangam- Sanquelim
The new Income-tax Act, 2025 is applicable from April 1, 2026 in respect of income earned during financial year 2026-27 and onwards. The entire old Income Tax Act, 1961 is restructured for simplification and clarity by reducing sections from earlier 819 to 536 by deleting the outdated and obsolete sections,by reducing words from 5.12 lakhs to 2.6 lakhs to make it simple, and long paragraphsare replaced byTables. The confusing concepts of “Previous Year” and “Assessment Year” is replaced by “Tax Year”. Notices, penalties and assessments are more structured.This Act is expected to reduce litigations due to ambiguous language which even an expert could not understand.
The writer is well established, senior practicing chartered accountant with wide experience in taxation and finance. He is also a strategist in turn round management of institutions.
