Hyderabad: Brokers help to convert black money to white using penny stocks

Hyderabad: Brokers who helped convert black money using penny stocks collected up to 15 per cent as commission. As against this, the top I-T slab is 30 per cent and income declaration scheme levies 45 per cent.

An official from the I-T department explained the modus operandi:

Company ‘X’ registers itself with the Registrar of Companies or as a private limited company in any state and lists on the stock market. In most cases, the company exists only on paper.

Company brokers lure stash holders with the prospect of legalising black money, with a commission that is lower than the tax rate. Shares are alloted to subscribers at low prices, sometimes as low as Rs 1 or Rs 2 a share.

The broker insists on a compulsory one-year lock-in on shares issued thro-ugh the preferential route, in order to secure LTCG eligibility.

The stock is held for a year, during which time its price is artificially raised around 1,000 times. A Rs 1 lakh stash investment will yield Rs 10 crore white money.

In most cases, the brokers increase the value of the stock artificially by up to 100 times but the I-T officials found that in the Telugu states, it is raised by 1,000 times.