Govt to scan purchases over ₹6 lakh

NEWDELHI:Retailers will soon have to report purchases above ₹6 lakh to the Financial Intelligence Unit (FIU), said a government official working on the proposal targeted at preventing money laundering.

This limit will mainly be applicable on jewellery and luxury goods.

“Globally, in most countries, the limit for reporting such transactions is set at $10,000,” added the government official who spoke on condition of anonymity. “Discussions are on to decide the limit, with consensus veering around ₹6 lakh.”

Apart from helping government agencies such as the Enforcement Directorate detect money laundering (when this information is used along with other information), these reports could also help the income-tax department identify individuals whose purchases are disproportionate to their known sources of income.

The National Democratic Alliance has announced several measures to crack down on black money and money laundering, including deregistering shell companies that exist solely to facilitate such transactions, and strengthening the Benami Transactions Act.

The government has barred cash transactions above ₹2 lakh, and any transaction of ₹50,000 or above has to be supported with the PAN number of the buyer, although many sellers get around this.

The government, in a notification issued on August 23, 2017, mandated gems and jewellery dealers to report their transactions, but the notification was withdrawn in October because no threshold was set and jewellery dealers complained of inconvenience.

Under the Prevention of Money Laundering Act, banks and financial institutions are required to maintain records of all transactions over ₹10 lakh, all cross-border wire transfers of more than ₹5 lakh. The law also requires all purchase and sale of immovable property of ₹50 lakh or more to be flagged.

Post-demonetisation banks are also required to report cash deposits over ₹50,000.

“Though cash transactions are banned above ~2 lakh, recent data shows that accountants are being used to creatively flow black money through the legal banking channels. A threshold for reporting purchases will help us track cases of disproportionate assets, corruption money , and frauds,” an official in the Enforcement Directorate (ED) said on condition of anonymity.

A recent study by ED showed that 48% black money is laundered through legitimate financial channels using shell companies. “So because the transaction is not in cash does not mean it does not require tracking,” added the ED official.

THE SCRUTINY WILL PRIMARILY BE ON PURCHASE OF LUXURY GOODS AND JEWELLERY