Black money is basically the accumulation of income obtained illegally. It is not declared for tax purpose. The issue of black money is prevalent in India and the government has come up with stern measures to deal with it lately. The money earned via unlawful means is known as black money. There are various sources of generating black money and people have been practicing these since decades despite the negative impact they have on the society.
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The problem of black money is not new to our country. Money generated via various illegal sources and the attempt to hide it from the government for the purpose of tax evasion has been a common practice here.
The problem of black money has given rise to a number of other issues in India. False information about the country’s economy is among the major issues being faced due to black money. The government is completely dependent on the tax revenue and evasion of tax to accumulate black money has a major impact on the nation’s fiscal system. Apart from the impact it has on the nation as a whole this also impacts the general public as it is the basis of social and economic disparity in the country.
There are a number of causes of accumulation of black money. The high tax rate set by the government is said to be the main reason for it. Other reasons include the different rates set for excise duty, the price control policy, the real estate market, inflation and quota system. People look for various ways to hide their income from the government and get away with it.
The need to stop this practice must be sensitized. While the government is taking steps to eliminate this problem it cannot achieve success in this direction if the public doesn’t support.
Introduction
Black money is basically the money earned in black market. It is the amount which is hidden from the government so as to avoid taxation on the same. The accumulation of black money has several negative repercussions on the society with economic and social disparity being the major ones.
Sources of Black Money
Now the question remains that when there are so many negative impacts of black money then why isn’t the government taking steps to eradicate the problem? Well, the government is making efforts to free the country of black money however the sources of this ill practice are stronger than the policies imposed to get rid of it.
It goes without saying that evasion of different types of taxes including the income tax, state taxes, corporation tax, excise duty and customs duty is the key to generating black money. Here is a look at the various other sources of black money:
Conclusion
The problem of black money has persisted in our society since decades. It is high time the government should come up with a foolproof plan to free the country from the clutches of this ill practice.
Introduction
Black Money is one of the major problems being face by our country these days. This is one of the reasons behind the economic disparity that in turn causes social inequality which is the root cause of several problems in the country. There are a number of factors that lead to this problem. Some of these include the high rate of tax, increased cost of living, inflation, different rates of excise duty and the real estate market.
Ways to Control the Problem of Black Money
It is important to control the problem of black money as it is hampering the growth and development of the country to a large extent. Here are some of the ways in which we can control this issue:
Conclusion
While the Modi government has taken the step of demonetization to break this illegal wealth accumulation, there is still a lot that needs to be done in order to bring this problem down. People must understand the importance of paying the tax and should refrain from concentrating black money. The small contribution each citizen does in the form of taxes helps in the development of the country.
Introduction
Black money is the money on which tax is not paid. It is hidden from the government just to keep it exempted from tax. There are a number of means used by people to keep their money under wraps and escape from paying the tax. Here is a look at some of these and also the way government has tried to curb this problem in the recent past.
Black Money Deposited in Foreign Lands
Many big business men, ministers and celebrities are known to have deposited their money in foreign banks. Though the total amount deposited by Indians in foreign bank is not known, there are many reports claiming estimate amount of money deposited by Indians in their foreign accounts. As per one of these reports a whopping US$1.06 trillion has been held in Switzerland while another report claims that Swizz bank accounts of Indians includes around US$2 billion. It has also been claimed that illegal funds of Indians in foreign tax havens amount to around US$ 500 billion.
Demonetization – A Step to Eradicate Black Money
Recently, the Modi government took a major step to eradicate the problem of black money. On the 8th of November 2016, Narendra Modi announced that 500 and 1000 rupee notes would cease to be legal from midnight. ATMs all across the country were closed on 9th and 10th of November. These were refilled with 2000 rupee notes and new version of 500 rupee notes. The old notes were removed completely from circulation. As per the government this action would bring down the accumulation of black money and bring down the illegal businesses and activities that are funded by the same.
The sudden announcement of the withdrawl of old currency notes and the shortage of new notes created havoc in the country and disrupted the normal functioning across of various sectors for several weeks. The decision had mixed reactions from the public. The decision was condemned by many stating that it has only caused inconvenience to the general public. It has been criticized for being poorly planned. Public came out to protest against the government in various parts of the country.
However, the government claimed that the move is aimed at improving the overall condition of the society and people will see the positive results in the long term.
Impact of Demonetization
While the move was condemned and criticized by many here is a look at the positive impacts of demonetization:
Conclusion
The issue of black money has been eating the country like a parasite. While demonetization has helped in controlling it to some extent there is still a lot that government should do to get rid of this issue.
Introduction
People earn money from different sources and do not bring it to notice so that they can refrain from paying tax. This accumulation of money on which tax is not paid is known as black money. The problem of black money has been prevalent in our country since long. There are a number of factors that contribute to this problem.
Causes of Black Money
Here is a look at the various causes that lead to the problem of black money in India:
The rate of tax in India is quite high. The increase in the taxes and duties has forced people to take the route to illegal wealth accumulation. Tax free income limit in the country is just Rs. 25,000/-. This amount is not sufficient to run a household these days when the cost of living is sky high. This is the reason why professionals who earn more tend to hide their income so that they don’t have to pay tax.
The prices of certain commodities such as fertilizers, sugar, cement, etc are regulated by the government by way of its Price Control Policy. The policy is rigid and does not go by the ups and downs in the market. The private manufacturers and retailers take advantage of this policy that results in black money.
The government has set different rates for excise duty based on the quality of products. In order to avoid paying higher rate of excise duty, the manufacturers at times downgrade a product. This leads to the generation of black money.
Real estate transactions involve huge amount of money. People accumulate black money via real estate transactions. Purchasing property at a cheaper rate and selling it when the prices rise has become a lucrative business and a lot of black money is generated with this.
The government has set a certain quota for export, import and foreign exchange. While this is set for the benefit of the people it is often misused to accumulate black money.
High inflation rate is also known to be one of the causes of black money.
Impact of Black Money
Black money does not only have a negative impact on the country’s economic condition but also has adverse social consequences. It creates economic disparity in the country which undoubtedly is the basis of social disparity. Such practices are the reason why the rich here are getting richer and the poor are getting poorer. Social inequality leads to frustration among people and gives rise to crimes such as robbery, bribery and more.
Tax evasion also means the amount that could have been used for the country’s growth and development did not reach the government. If the government does not get enough revenue it would be unable to take up new projects for the development of the country and the uplift of the poor sections.
The countries where people pay taxes religiously are far better off as compared to those where there is huge amount of accumulation of black money.
Conclusion
The government has taken certain steps to eradicate the issue of black money. The recent and one of the major steps taken in this direction was demonetization. While this step helped in eliminating black money to some extent many people condemned it. However, even if it helped, it definitely was not enough. A lot more needs to be done in order to stop this ill practice. The government must look for more effective measures to curb this problem. And remember, the government alone cannot bring this issue to an end. It can only be curbed if each and every citizen of the country contributes his bit.
Introduction
Any money on which income tax or other taxes have not been paid is termed as “Black Money”. It is usually earned through corrupt practices and is not declared fearing legal action. Sometimes, the amount of black money stalked up in a country is so higher that it could run a parallel economy. Black money is accumulated by corrupt officials, politicians, businessmen, criminals, smugglers and any other individual trying to evade taxation.
Black money is a huge hindrance to a nation’s growth, as it is either used in black market or in money laundering. In the below essay, we will go through the sources of black money, its socio economic effects and its possible counter measures.
Sources of Black Money
There are various sources of generating black money. One of the basic areas where black money is generated and exchanged is in the government sector. Corrupt government officials authorized to make policy and financial decisions, maliciously convene with interested parties to favor them and get perks/bribe in return. This money obviously cannot be declared and is purposely hidden from the tax net; though, it is invested in a new venture through shell companies or money laundering. Thus, the money which should be taxed and the taxed amount utilized for public welfare schemes, escapes the tax agencies, having a deteriorating affect on the overall economic health of a nation.
Private firms also generate black money through a method called “Transfer Mispricing”. The modus operandi used in this method is to manipulate the price of transaction between two parties, in order to deceive tax agencies and benefit both the parties. Though the money is not earned by dishonest means, it is purposely hidden from tax authorities to evade taxation and is still considered black money.
Many other anti national, anti social and criminal activities are the sources of black money. Anti national activities mostly rely on black money generated internally or unscrupulously provided as foreign donations.
Socio-Economic Impacts of Black Money
Accumulation of black money by few corrupt individuals, damages the economical growth of the nation, as the money hidden from tax agencies is further invested into other businesses or sent outside to tax haven countries, with lighter tax laws.
Crores of rupees collected as tax, could have been used for public welfare schemes- building schools, colleges, hospitals and roads etc. Black money not only weakens the economy of a nation, but also widens the economical gap by making rich richer and poor poorer.
Presence of huge amount of black money pollutes the social structure of a nation and adversely effects the functioning of government agencies. Money earned by dishonest means, is used to bribe government officials and other relevant agencies, in exchange to a certain favor. This corrupts the whole government machinery and reduces peoples’ trust in the government and administration.
Inflation is another significant effect of black money, on a nation’s economy. Black money increases the purchasing power of people, automatically resulting in higher prices of commodities. An increased price of everyday commodities put a strain on the pocket of common man, while it hardly affects those who have black money. This in turn widens the gap between rich and poor, by making the poor poorer.
Measures to Counter Black Money
Many steps could be taken by the government to counter black money. The government of India had from time to time announced voluntary disclosure scheme for people who have stacked black money. The scheme persuades them to declare their money and other illegal assets and to pay the tax at a lower rate than usual.
Take a resolve to not to bribe any government official for personal gains. However, small or big the matter might be, your pledge to not take the illegal path, will definitely improve nation’s social and economical health.
One of the major steps taken by the government of India to counter black money was demonetization. It stands for stripping a particular denomination currency, of its status as a legal tender. In demonetization, the black money accumulated by anyone, instantly loses its worth, leaving the holder with no option but to exchange it by declaring it to bank or discard it.
Apart from all the above methods to counter black money, there is a need of stricter laws to punish someone who deliberately conspires to evade taxation. People with huge amount of undeclared money, use it to bribe tax and law enforcement officials, escaping from punishment. There is an urgent need to remove such existent loop holes in present laws and also to make and implement new stricter laws.
Conclusion
Black money has a potential to push back the progress of a nation and generate economical and social disparity. Illegally earned money, slowly corrupts the whole system and leaves a nation in a state of economical and social upheaval. It is a fight that no government can fight alone and the people also must be co operative and vigilant to fight against any kind of financial fraud or illegal activities. Any information about any kind of illegal transactions must be immediately reported to the concerned authorities.
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