Saturday Brain Storming Thought (225) 01/06/2024
HUNDI
Hundi
A Hundi or Hundee is a financial instrument that was developed in Medieval India for use in trade and credit transactions
Hundis are used as a form of remittance instrument to transfer money from place to place, as a form of credit instrument or IOU to borrow money and as a bill of exchange in trade transactions
Types of Hundi
1) Shahi Hundi
It involves directly transferring funds from one person to other, often across countries
The sender gives it to recipient, who can claim the money fron the receiver in the destination country
2) Darshani Hundi
It works asa receipt for the money deposited with a Hawaladar
This type of Hundi is often used for future or delayed payment
3) Muddati Hundi
It is also called a time-bound hundi, sets a specific date of payment
The recipient can claim the money only after that date, ensuring that the transaction are done on time and the money is delivered securely
4) Jawabi Hundi
It is used in response to an existing it
It is used when a person wants to settle a debt or make a payment related to a previous hundi transaction
Jawabi Hundi is a reply to the initial hundi
5) Hundis payable to Bearer
These are payable to the person who has the hundi, not a specific individual, making them flexible and convenient for transaction
6) Hundis payable to Order
These are payable only to a specific person mentioned on the hundi
It can be transferred tp another person, but Final payment is made to the person named on the hundi
7) Dhani Jog Hundi
In this type, the remitter instructs the hawaladar to pay the money to the receiver only after the remitter receives confirmation
This adds an extra layer of security and ensures that payment is made after verification
8) Nam Jog Hundi
This type requires the receiver to provide a passward or code shared with the sender before the funds are realesed
It ensures that the money goes to the intended recipient
Advantages of using Hundi
1) Quick and efficient
2) Low cost
3) Accessible
4) Private and secret
5) Trustworthy
6) Useful in trade and commerce
7) Useful for Borrowing and Lending
8) Rules and challenges
Disadvantages of Hundi
1) Hundi is not a legal instrument for money transfer
2) Its use is unconscionable
3) There is no written record of hundi transactions, which makes detection and policy planning difficult
Khaka Hundi
A Hundi which has already been paid is known as Khaka Hundi
Khoti Hundi
In case there is any kind of defect in the hundi or in case the hundi has been forged, then such hundi is known as Khoti Hundi
Surat Hundis
The Surat Hundis were honoured in the far off markets of Cairo in Egypt, Basara in Iraq and Antwerp in Belgium
Jokhmi Hundi
The term jokhmi has come from the Hindi word jokhim means risk
It is generally drawn against goods shipped on a vessel and shows a certain risk involved in the shipment of goods
If anything wrong happens to the goods during transit then the consignor cannot claim payment of the hundi from the consignee
Thus, a jokhmi hundi safeguards the interests of both parties
Risks in Hundi
1) The risknof loosing your money
2) No transfer tracking
3) Threat to Nepalese economy
4) Harming the government and foreign exchange reserves
5) Risk of sanctions and fines
Parties involved in Hundi
1) Drawer
The person or entity who issues the hundi, ie the party making the payment
The Drawer creates the Hundi and specifies the details of the payee and a payment amount
2) Payee
The person or entity who receives the payment mentioned in the Hundi
The Payee is the intended recipient of the funds and presents hundi to the holder for payment
3) Holder
The person or entity who possesses the Hundi and can claim the payment
The holder acts as an intermediary and plays a crucial role in verifying the authenticity of the Hundi and facilitating the payment process
Process flow of Hundi transaction
1) Issuance of Hundi by drawer
2) Handover to Payee
3) Presentation to the Holder
4) Payment and Endorsement
5) Retention of Hundi
Section 69D – Income Tax Act, 1961
Amount borrowed or repaid on Hundi
Where any amount is borrowed on a hundi form, or any amount due thereon is repaid to, any person otherwise tgan through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be income of the person borrowing or repaying the amount aforesaid for the previous year in which the amount was borrowed or repaid, as the case may be
Provided that, if in any case any amount borrowed on a hundi has been deemed under the provisions of this section to be the income of any person, such person shall not be liable to be assessed again in respect of such amount under the provisions of this section on repayment of such amount
For the purposes of this section, the amount repaid shall include of interest paid on the amount borrowed.
COMPILED BY:-
Er. Avinash Kulkarni
9822011051
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer
