Lok Sabha Question No. 4050 (UNSTARRED), answered on 2018-08-10
Subject: Black Money in Share Market
Ministry: FINANCE
Asked by: NEELAM SONKER

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO. †4050

TO BE ANSWERED ON FRIDAY, 10 TH  AUGUST, 2018

SHRAVANA 19, 1940 (SAKA)

BLACK MONEY IN SHARE MARKET

†4050:  SHRIMATI NEELAM SONKER :

Will the Minister of FINANCE be pleased to state:

- (a)  whether the Government has fixed any norms or issued any guidelines to control black money in share market;
- (b) if so, the details thereof;
- (c) the total investment in the share market in the past three years and the number of cases of black money investments unearthed; and
- (d) the total number of cases in which action has been taken by the Government?

## ANSWER MINISTER OF STATE FOR FINANCE (SHRI SHIV PRATAP SHUKLA)

- (a) & (b) :  Securities and Exchange Board of India (SEBI), vide circular dated April 27, 2007, has mandated that PAN would be the sole identification number for all participants transacting in the securities market, irrespective of the amount of transaction.

Schedule VII of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 , inter alia , states that:

- i. For  registration  of  transfer  of  securities,  the  transferee(s)  as  well  as  transferor(s)  shall furnish a copy of their PAN card to the listed entity.
- ii. For securities market transactions and/or for off-market or private transactions involving transfer of shares in physical form, the transferee(s) as well as transferor(s) shall furnish copy of PAN card to the listed entity.

To regulate transactions between clients and brokers, SEBI, vide circulars dated August 27, 2003 and July 12, 2018, has, inter alia , mandated that:

- i. Brokers and sub-brokers should not accept cash from the client for purchase of securities and / or give cash against sale of securities to the clients.
- ii. Further,  it  has  been  mandated  that  all  payments  shall  be  received  /  made  by  the  stock brokers from / to the clients strictly by account payee crossed cheques/ demand drafts or by way of direct credit into the bank account through electronic fund transfer, or any other mode permitted by the Reserve Bank of India.
- iii. In the case of securities also, giving / taking delivery of securities in 'demat mode' should be directly to / from the 'beneficiary accounts' of the clients except delivery of securities to a recognized entity under the approved scheme of the stock exchange and / or SEBI.

Further, SEBI, vide circular dated June 6, 2018, SEBI, has, inter alia :

- i. brought to the notice of SEBI registered market intermediaries the various notifications issued by the Government of India on Prevention of Money Laundering Rules, relating to making Aadhaar  number  issued  by the  Unique  Identification  Authority  of  India (UIDAI)  and  Permanent  Account Number (PAN) or Form No. 60, as defined in Income Tax  Rules,  1962  mandatory  for  both  new  and  existing  accounts  with  financial  market intermediaries including securities market intermediaries.
- ii. SEBI has further clarified in the above mentioned circular that in case PAN is not submitted by any client at the time of opening of account based relationship, one certified copy of an 'officially valid document' (OVD) shall be submitted. However, for securities market, in terms of SEBI circular dated April 27, 2007, the requirement of PAN would continue to be mandatory for completing the KYC process.

Moreover,  SEBI  registered  intermediaries  are  required  to  follow  stringent  KYC  norms  on  an ongoing basis and are also required to file Suspicious Transaction Reports (STRs) to the Financial Intelligence Unit (FIU) in case of suspicious activities of their clients.

- (c) & (d) The annual turnover for cash market for BSE & NSE and market capitalization for BSE for the last 3 F.Y.s is given below:

(Figures in Rs. Crore)

| Year       | Total Turnover (BSE)   | Total Turnover (NSE)   | Total Turnover (BSE+NSE)   | Total Market Cap (as on 31 st March of the F.Y.) (BSE)   |
|------------|------------------------|------------------------|----------------------------|----------------------------------------------------------|
| FY 2015-16 | 7,40,089               | 42,36,983              | 49,77,072                  | 94,75,328                                                |
| FY 2016-17 | 9,98,261               | 50,55,913              | 60,54,174                  | 1,21,54,525                                              |
| FY 2017-18 | 10,82,968              | 72,34,826              | 83,17,794                  | 1,42,24,996                                              |

Appropriate action against evasion of taxes/black money, including against cases involving black money investments, is an on-going process. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of taxes, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable.  The Income-tax Department does not maintain sector-wise details of the searches conducted.

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