Daijiworld Media Network – Mangaluru (MS)

Mangaluru, Nov 20: A business scheme that has been flourishing in cities like Bengaluru and Mysuru has now made its way into Karnataka's coastal region. This scheme lures customers with promises of monthly prizes, including apartments, cars, bikes, and even a kilogram of gold, with celebrities being used to promote it.

Under the scheme, participants are required to pay a monthly instalment of Rs 1,000. If 10,000 people enroll, the organizers collect Rs 1 crore. Out of this, Rs 50 lac is earmarked for the first month’s prizes, including flats, cars, bikes, and gold, leaving the organizers with Rs 50 lac in profit. Over a year, this profit amounts to Rs 6 crore. The scheme claims to offer prizes exceeding Rs 1 crore in its final months. However, to fulfill these promises, the organizers would need Rs 9 crore to reward around 9,000 members. Questions arise about how they would manage such payouts and how prizes are distributed without adhering to tax regulations.

The organizations running these schemes employ young individuals on a commission basis for publicity and membership registration. Additionally, members who bring in new participants also earn a commission. The targets of these schemes are typically government employees, corporate professionals, and middle-class individuals with monthly salaries.

Cine actors and other celebrities are often featured in promotional content across platforms like Facebook, Instagram, X (formerly Twitter), and YouTube. Fans of these celebrities risk losing money if they are swayed by such endorsements.

As per tax regulations, any prize awarded in a lucky draw or similar schemes is subject to 30% tax. For instance, a winner of Rs 1 lakh must pay Rs 30,000 in tax. According to Don Prakash, a chartered accountant working for a reputed firm in Mangaluru, if these schemes award prizes worth Rs 50 lakh, the income tax department should collect Rs 15 lac from the winners. However, the scheme organizers claim that no taxes are applicable on the prizes, indicating potential fraud.

The silence of income tax authorities on this matter raises concerns and casts further doubt on the legitimacy of these schemes.