ANATOMY OF A CASH HOARDER by Nishant Khemani

Poverty is a curse, but too much ready cash is a hazard too, particularly if it's out of the tax net, or the black money. It’s risky, not just because it’s an offence not to pay taxes, there are other real imperils attached to it like flooding, fire, theft and so on.

Recently, a judge of a high court realised it the hard way. He was in the news for hoarding a lot of cash, with impunity it seemed, stashed up in a room, for the tax enforcement agencies would never dare enter a judge’s house, more so if he belongs to higher judiciary who stays in a government bungalow in the Lutyens Delhi. 

But destiny has funny ways of getting around. A fire broke out, and the firemen while dousing the fire, found stashes of cash, in varied degrees of incineration. A video was taken, shared, went viral, and all hell broke loose. An inhouse enquiry setup by the Apex Court established the presence of wads of cash (though has since disappeared). The Chief Justice of India has referred the matter to the government, reportedly, to initiate impeachment proceedings against the judge in question for he has, reportedly, denied to resign.

I don’t name the judge because the story is not to highlight how people in high positions, not just in judiciary, but other wings of the state, feel obliged to deal in cash with no fear of repercussions. To them it is a safe crime or, perhaps, they don’t even remember it’s a crime.

The digitization of the bank transactions, online payments, payments by QR code has made a dent to the cash economy. The Faceless Scheme of Assessment is a good initiative that eliminates human intervention to prevent undue influence and has curtailed manipulation of taxes. CBI has registered many cases against IT officials who tried to contact the tax payers and defy the purpose of faceless scheme.

According to Association of Chartered Certified Accountants, the shadow economy in India will shrink to mere 13.6 percent of the GDP by this year. With the tax slabs much higher, I feel, a high percentage of cash transactions are done by the people in power, be it bureaucrats, politicians, even the judges. Selling books and paintings is also a good way to manage excessive cash.

It is the common man who has to deal with the dire consequences of being caught with unaccounted cash and their chances of being caught, unlike a judge, or government functionaries, is not an exception. A cash rich man’s common nightmare is that of a taxman decamping with all their money. But some of the aam aadmi are risk averse, live dangerously, have devised novel ways, which, with time, has become a way of life, to keep their cash undetected, and not pay taxes. 

I, a chartered Accountant (CA), who runs a firm, would never advise to hoard cash, but many won’t adhere to a sane advice; they don’t want to part with their ‘hard-earned cash’ and are almost compelled to hoard it, hide it. This piece is devoted to innovative cash hoarders and their methodologies. Let’s call such a person by the name Cash Mania Dhan—or CM Dhan.  

It is a professional hazard, many CM Dhans come to me to help them fix their crooked balance sheets, manage messy tax returns, and more often than not, it boils down to reconcile the irreconcilable. I’m more than horrified that CM Dhans have little fear of the rule of law. I tell them, no one is safe with a lot of unaccounted cash. Now we know, a play of fate can make even a sitting high court judge run for his money.

I tell all the CM Dhans of this world, even if he or she holds a high office, for heaven’s sake, don’t store cash like chaff. One has to be a little innovative. Some CM Dhans have mastered the art of stashing cash and keeping out of trouble. Here’s how they do it.

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The digitization of the bank tractions, online payments, payments by QR code has made a dent to the cash economy. The Faceless Scheme of Assessment is a good initiative that eliminates human intervention to prevent undue influence and has curtailed manipulation of taxes. But some are risk averse, live dangerously, have devised novel ways to keep their cash undetected, and not pay taxes. 

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CM Dhan loves cash, though, government is committed to a cashless economy. Despite digitalisation of the banking services, and use of QR code being all pervasive, CM Dhan has devised magical solutions—well almost magical.

There's a thing called ‘unused jewellery’—because it’s unused, therefore will never be seen. Suddenly, unused jewellery surfaces out of oblivion for tax purposes, and is often described as ‘my grandmother's necklace’ and it, almost instantly, becomes GST-free income. And it works very well if you have a jeweller friend you can trust, blessed with a pliable approach, and whose books are as flexible as an Olympic gymnast—willing to bend backwards for you.

The excess cash problem will be fixed by showing the sale of ‘unused jewellery.’ So, the jeweller friend will transfer the money to CM Dhan’s bank account in exchange of cash, of course, will keep a cut, and on CM Dhan’s tax returns will show as the ‘proceeds from sale of ancestral jewellery. Long-term capital gain.’ Grandmother has a benevolent influence in CM Dhan’s life by giving a sort of cultural immunity. No taxman would ever question family gold, though, it is advisable, not to show selling of gold in bulk, in kilograms, unless CM Dhan can produce pictures of his grandmother decked in gold.

CM Dhan has a black magic detergent that turns black money into spotless white, I call it the salary loophole. CM Dhan finds a company that’s is legit enough to file TDS and hands the company his cash and, in return, the company in question pays him or a family member, a salary via bank transfers every month, of course after keeping a cut—that’s much less than the tax liability.

Also, salary is an expense of the company and saves on the corporate tax–so it’s a win-win situation. The cash is laundered and becomes an ‘earned income’. Even Nani ji can be made the head of product development at the ripe age of 86 years. If she’s dead, mother, wife or daughter, can take up the mantle. The only limitation being that Nani ji will have to eventually present herself at one of the team meetings and pretend to understand what’s going on and, ironically enough, supports ‘corporate social responsibility’.

CM Dhan indulges in Hera Pheri (swindling) of money. Instead of being an employee like Nani ji, CM Dhan has an option of becoming an entrepreneur. This way the cash can stay home without him having to step out of his house. He starts a paper business where cash is king and receipts are optional. For example, Gymnasiums–there is no receipt asked or given for push-ups; or the salons that offer ‘package deals’; or the sweet shops, for rasgulla, or any other sweet, don’t generate invoices.

CM Dhan starts depositing unaccounted cash as ‘daily sales.’ For a bumper sale, he blames it on a good season or the wedding season. It’s, perhaps, one of the oldest excuses in the Indian business manual. However, certain precautions need to be taken, like CM Dhan has to make sure that their shop or gymnasium doesn't accidentally appear on Google Maps and a taxman showing up for a haircut or at gymnasium or to buy rasgulla for his daughter’s birthday. Often, CM Dhan develops a rasgulla-like-round-tummy after having digested so much cash.

CM Dhan is clever, logical, and he gets away with it, mostly, but these ‘methods’, while common, are not legal. But here’s the thing: CM Dhan is not a judge of a high court. He will not have to deal with an inquiry panel of senior peers. If the worst comes to worst, he will have to face a taxman with a notice, armed with a calculator, and the confidence of ten priests—now that too has become faceless.

The moral of the story: CM Dhan would say, if you must hide your cash, don’t keep it in a storeroom, instead, use a laundromat. All said and done, I doubt CM Dhan gets a sound sleep at night.