Black money refers to undisclosed income that is kept hidden from the tax authorities, often to evade taxes or engage in illegal activities. In India, the government has implemented stringent measures to combat black money and penalize those involved in its conversion into white, or legitimate, money. As the RBI announced the withdrawal of Rs. 2000 notes from circulation, anyone assisting a black money holder holding Rs. 2000 notes, by helping him convert them into white will attract the following penalties and consequences as per different departments and acts:

Income Tax Department - Unexplained Cash Credit (Section 68): Under Section 68 of the Income Tax Act, unexplained cash credits are subject to severe penalties. If an individual is found to possess unexplained cash credits, a flat tax rate of 60% is levied, disregarding any benefits of the basic exemption limit or tax slab. Additionally, a surcharge of 25% is applied, along with a penalty of 6%. This effectively results in an 84% tax liability on the undisclosed cash credits. The penalty can be imposed for up to three years if the amount is less than 50 lakhs and for up to ten years if the amount exceeds 50 lakhs.

Money Laundering Act: Money laundering, the process by which black money is converted into legitimate money, is a serious offense under the Money Laundering Act. Those found guilty of money laundering can face imprisonment ranging from three to seven years, along with fines. If the offense falls under the purview of the Narcotic Drugs and Psychotropic Substances Act, the maximum sentence can be extended to ten years. These strict penalties reflect the gravity of the crime and aim to deter individuals from engaging in illegal activities.

Benami Transaction Act: The Benami Transactions (Prohibition) Act, introduced to curb Benami transactions, provides additional legal consequences for those involved in converting black money into white. If an individual is found guilty of holding benami properties, which are properties held in the name of another person, the act imposes imprisonment of up to seven years and fines. This act plays a crucial role in identifying individuals who use proxy ownership to conceal the true source of their wealth.

Assisting black money holders in converting their funds into white money is a serious offense in India, with significant penalties and consequences. The Income Tax Department can impose an 84% tax liability on unexplained cash credits, along with additional penalties and surcharges. Moreover, money laundering and benami transactions are punishable under separate acts, leading to imprisonment ranging from three to seven years, along with fines. It is essential for individuals to comply with the law and refrain from engaging in any activities that facilitate the conversion of black money into white money.