5 Ways to Convert Black Money into White Money


The Article no ways encourage taxpayers to use any of the below methods. The Article is just to let people know about what others are doing to convert their Black Monet into white money currently in India. In addition to those mentioned below there are many other methods which people use to convert their black money into white money.

CASE 1: Go to a Jeweler. Give him the amount you want to convert into white as cash. he would give you a cheque back for the same amount less 4%. He would give you a purchase bill to show that you have sold silver utensils to him. On the amount of the cheque when you file your return you will have to pay no capital gain tax as Silver utensils are Personal effects and capital gain does not arise on sale of personal effects. There you go , the money is white now!!!

CASE 2: Conversion of Black Money to White Money with the application of Sec 51 of the Income tax act, 1961.

Mr. X : A Business man who wants to convert his black money to white.

Property: Cost of Acquisition: Rs. 10 Lacs.

Mr. Y: A Salaried person who wants to convert his white money to black may be because he has to make payment in black for the property purchased by him.

Mr. X enters into an agreement with Mr. Y for the sale of property for Rs. 150 lacs with a condition that advance money of Rs. 30 lacs shall be given by Mr. Y and balance shall be paid within 3 months else advance money shall be forfeited.

Modus Operandi: Mr. Y makes payment of Rs. 30 lacs to Mr. X by way of a cheque as the advance money and Mr. X in turns gives the black money to Mr. Y of the same amount. Now, Mr. Y intentionally fails to make balance payment within the due time and the amount is forfeited by Mr. X. In this manner black money of Mr. X is converted to white money.The money is white now!!!

CASE 3: Another popular way of converting black into white money is by getting a gift from a relative. For this modus operandi, the relative must possess white money. For example, you have some black money (say Rs. 10 lacs) which you want to convert into white. You can ask your relative to gift you Rs.10 lacs by way of cheque and you will in turn transfer your black money to him/her. Here 56(2)(vii) is not attracted as gift is received from a relative.

CASE 4:- Converting black to white by way of cheque

People also give the black money to a person (say a family member or a friend) and take a cheque from them. They show that as a loan receipt and thus they can temporarily convert their black money into white.

Then they again give them a check as a repayment of loan and receive cash which converts white to black again, but during the time the loan is outstanding, they convert their black into white, but people who do this are not aware that Section 68 on loans is applicable and you will have to prove the creditworthiness as well as the genuineness of transactions to the IT Department or else the loan receipt will be treated as income from undisclosed sources.

CASE 5: Another popular way of converting black into white money is showing income in cash like tuition income or any other professional fees.Just pay the tax at normal rate and your money is white now!!!!

Also people make investment where it is allowed to invest in cash and where the maturity is tax free for example buying an insurance policy where you are not required to show all your premiums and the maturity is tax free. For example your insurance premium is 25000/- per annum and you can pay 6000 in check (shown in books) and remaining in cash, people increasing the proportion of premium paid in cash increasing as and pay entire premium in white for last two years before maturity. No ITO is going to check premium of more then last two years and it is a small example. People are paying huge cash premiums everyday. In case of this small premium, the cost of investigation exceeds the benefit to the exchequer so the ITO will give a test check for at the max last two years.


  • I don’t recommend readers to follow any of these steps. I just want them to be aware regarding these false practices.
  • I encourage open discussion regarding this article but advices, opinions, suggestions which may land the opinion seekers into trouble later on are not encouraged.
  • I trust that a tax planning should be done in such a way that it can stand the test of the legal battle of course subject to debates.