In a step to crackdown on black money, the government has announced a ban on the use of Rs 500 & 1000 currency notes as legal tender sparking panic among many. While people rushed to banks to get their notes exchanged, the objective to tackle black money may not go entirely as planned. 

The government has warned people that cash deposits over Rs 2.5 lakh could lead to taxation and a 200% penalty will be imposed in case a person's income is unjustified. But despite these measures many may still manage to hide their illegal wealth.

Source: b'Source: Reuters\xc2\xa0'

Currently, India is said to have crores of  black money, out of which over $500bn is reportedly deposited in overseas banks. However, during the period from June to September, Rs 65,250 crores was declared under the government's voluntary disclosure of income scheme. 

Experts have already said it is completely impossible to recover the entire black money in the economy, so we spoke to a tax expert on the means people with black money could still use to evade taxation. Apart from the legal way of depositing cash in the banks till December 30, here are some methods that people may resort to and have done so in the past as well. 

Please be advised we do not endorse any of these methods.

Source: b'Source: PTI\xc2\xa0'

Conversion of cash into valuables

Investing the money in jewellery is one of the most common practices used to convert cash into assets. 

There were reports saying that gold prices went up to Rs. 48,000 per 10gm  as opposed to the Rs. 30,000 official price in some localities of Mumbai yesterday. 

"This way people get rid of their illegal cash by paying a higher rate for the ornaments," an expert said, on condition of anonymity.  

The other method is buying jewellery with backdated bill. " Many people resort to this method. Investing in jewellery is seen as a way to evade the legal system as it is unaccounted for," the expert said. 

Source: b'Representational image|Source: PTI\xc2\xa0'

Putting the money in different bank accounts of family members

Putting smaller amounts in different bank accounts divides a large amount, enabling more number of deposits. 

"Those who don't already have an account can also now get it exchanged. It makes it easier to move the cash in smaller denominations," the expert said.

Distributing money to employees and workers 

Cash could be distributed among trusted friends and employees who will return the money over a period of time. 

"The idea is to ensure smaller transactions as small amounts are not monitored," the expert said. 

In some cases,traders and shop owners deposit a certain amount with their employees and duly deduct the money from their salary over the period of time. 

"These mainly include small shop owners who seem to lead an ordinary life but have bundles of money in black," the expert said. 

Source: b'Source: Reuters\xc2\xa0'

The Hawala system

"Hawala transactions are expected to rise," the expert said.

The illegal system uses agents and middlemen to send money even out of the country to different countries. The person abroad can then send the money back in small transactions that go unchecked. 

"This is an easy way to send the money out the legal taxation system as it goes untracked," the expert said.