Black Money

Topics: Tax, Tax haven, Economics Pages: 4 (1316 words) Published: September 19, 2012
Black money is hot topic of common debate in the country now. This article explains in easily understandable way the various aspects of black money, starting with defining black money, generation of black money, how black money is washed and used as normal money, and need to tackle the black money menace, and other related aspects

What does the term Black Money mean?
Black money means,the money or income not declared for tax to the govt or relevant authorities, and hence the tax for which is not paid to the government. Thus, in simple words -black money is income on which tax is not paid and deliberately evaded.How black money is generated? Let us take the following two cases for example.

1. A person purchases a property or residential house. But only a part amount of actual price is recorded in the documents registered with the authorities. The stamp duty is paid only for the recorded amount, and not for the entire transaction amount.

2. A company shows a reduced income in its accounts by showing some unincurred expenses and hence pays lesser tax. In the above cases, the undeclared amount of property transaction and the amount held by fictitious expenses is black money. 

Here we should also note that ,though money on which tax is evaded is black money, we should also note that, tax saved using permitted methods of savings is not black money, as it is legally allowed.  In the two examples above, black money is generated from normal legal transactions.

However, huge amounts of black money are generated by illegal, immoral, and anti social transactions. Most of these have criminal nature,like drug trafficking, organised prostitution, bribery and illegal gratification, and Havala i.e unauthorized parallel foreign exchange transactions.Where the huge amounts of Black money is kept? Naturally as it is black money, the owners of this money will park it in a place where they will be safe under law, where they are able to use the money as desired....
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