Hello friends welcome to Sonu live ,in this article I’m going to tell you about What is Black Money and main causes of its generation in India, Effect of black money.
BLACK MONEY
All illegal assets earned from crime and the unreported taxable legal assets or incomes are collectively called black money.
SOURCES OF BLACK MONEY IN INDIA
Corruption Concealment Crimes and others
CAUSES OF BLACK MONEY IN INDIA
- High rates of taxes in the past
- Poor legal framework
- Inefficient Institutional Framework
- Massive population
- Lack of technology use in the past
- Criminalization in society and politics
EFFECT OF BLACK MONEY
- Economic effect including loss of revenue to government ,creation of parallel economy, instability, loss of effectiveness of economic policy and real state bubble.
- Social effect include increased crime and loss of trust of citizen on the institutions.
- Political effects include criminalization of politics, corruption, political instability, political distressed, threats to national security, loss of credibility of country.
In India, “black money” refers to income or wealth that is hidding from the government and tax authorities. It essentially exists “off the books”, and comes in two main forms:
1. Unreported income: This is money earned through any means but not declaring for tax purposes. This could include:
- Income from illegal activities: Drug trafficking, smuggling, organized crime, corruption, and tax evasion are some common sources of black money.
- Income from legal activities under-reported: Many businesses and individuals under-report their income to avoid paying taxes. This can practice through various methods, such as manipulating accounts, creating shell companies, or using cash transactions.
- Cash-intensive sectors: Industries like real estate, construction, and agriculture often handle large amounts of cash, making it easier to generate and circulate black money.
2. Unaccounted wealth: This includes assets like gold, jewelry, property, or investments that are not declaring to the government. Such wealth can store domestically or stashed abroad in tax havens.
Reasons for the term “black money”:
- The origin of the term is unclear, but it likely relates to the color of “hawala” transactions, a traditional informal money transfer system used in India and other parts of South Asia. Hawala transactions often involve large sums of cash that are not recording in any official books.
- The term also signifies the hidden nature of this money, as it exists outside the formal, legal economy.
Main causes of black money generation in India:
- Cash-based economy: India has a large cash-based economy, making it easier for transactions to occur without a paper trail. This creates opportunities for generating and hiding black money.
- Complex tax laws: The Indian tax system is complex and bureaucratic, which can incentivize individuals and businesses to evade taxes.
- Corruption: Corruption among government officials facilitates the generation and circulation of black money. Bribes and kickbacks often involve cash transactions that are not reporting to the authorities.
- Weak enforcement: The government’s efforts to tackle black money have been hampered by limited resources and manpower, making it difficult to enforce tax laws and detect illegal activities.
The existence of black money has significant negative consequences for India’s economy and society. It deprives the government of much-needed tax revenue, which could be used for development and social welfare programs. It also creates an unfair playing field for legitimate businesses and contributes to inequality.
I hope this explanation provides a comprehensive overview of black money in India. If you have any further questions, please don’t hesitate to ask.
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