Study the effect of Black Money on Indian economy

Contents
DECLARATION BY THE CANDIDATE.......................................................................................................2
ACKNOWLEDGEMENT...........................................................................................................................3
AIM........................................................................................................................................................4
RESEARCH METHODOLOGY..................................................................................................................4
HYPOTHESIS...........................................................................................................................................4
RESEARCH QUESTIONS..........................................................................................................................4
LIMITATIONS.........................................................................................................................................4
INTRODUCTION.....................................................................................................................................5
LITERATURE REVIEW.........................................................................................................................6
OBJECTIVES OF THE STUDY...............................................................................................................6
Defining ‘Black Money’.....................................................................................................................7
Generation of Black Money..............................................................................................................7
From where is it used........................................................................................................................8
Scenario of Black Money in India.........................................................................................................8
Present Status of Black Money In India............................................................................................9
Black Money of India in Swiss Accounts...........................................................................................9
Impacts of Black Money on Indian Economy......................................................................................11
Government measures against black money.....................................................................................13
A. Black Money stored in foreign countries and government measures against them.................13
B. Fight against domestic black money..........................................................................................15
CONCLUSION.......................................................................................................................................21
SUGGESTIONS.....................................................................................................................................22
References...........................................................................................................................................23

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DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A. LL.B (Hons.) Project Report entitle
“STUDY THE EFFECT OF BLACK MONEY ON ECONOMY” submitted at
Chanakya National Law University, Patna is an authentic record of my work carried out
under the supervision of MANAGERIAL ECONOMICS faculty Dr. Shivani Mohan.
I have not submitted this work elsewhere for any other degree or diploma. I am fully
responsible for the contents of my Project Report.

-------------------------

(Signature of the Candidate)

Chanakya National Law University, Patna

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ACKNOWLEDGEMENT

Any project completed or done in isolation is unthinkable. This project, although prepared by
me, is a culmination of efforts of a lot of people. Firstly, I would like to thank our
MANAGERIAL ECONOMICS faculty Dr. Shivani Mohan for helping me in making the
project on STUDY THE EFFECT OF BLACK MONEY ON ECONOMY, for her
valuable suggestions towards the making of this project.

Further to that, I would also like to express my gratitude towards our seniors who did a lot of
help for the completion of this project. The contributions made by my classmates and friends
are, definitely, worth mentioning.

I would like to express my gratitude towards the library staff for their help and specially to
the administration who increased the library timing. I would also like to thank the persons
asked for help by me without whose support this project would not have been completed.

I would like to express my gratitude towards the Almighty for obvious reasons. Moreover,
thanks to all those who helped me in any way be it words, presence

Encouragement or blessings...

B.B.A.LL.B (HONS)
3rd semester

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 Study the effect of Black Money on Indian economy

AIM
 To study about black money
 The researcher intends to study the causes and consequences of black money in Indian
economy
 To analyse the government measures w.r.t India

RESEARCH METHODOLOGY
 The researcher has used only doctrinal method of research for the accomplishment of
this project.
 The researcher has followed uniform mode of citation.

HYPOTHESIS
 The researcher thinks that the black money plays a negative role in the development
and growth of the country and its economy.
 The researcher thinks that black money affect the direct tax.
 The researcher believes that black money is the important reason for slow
development of India.

RESEARCH QUESTIONS
 What is black money
 Why do we need black money
 What is the impact in the society
 Whether it effect in the growth of a country

LIMITATIONS
 The “CORRUPTION” being much prevalent in our country, the researcher has
territorial and monetary limitations in completing the project at hand. Moreover,
taking the time into consideration, the researcher has to rely upon the doctrinal
method of research which are limited to library sources.

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INTRODUCTION

As we know that in Ancient times our country, INDIA, was popularly known as “Golden
Bird” because people of our country were more civilised in terms of coordination and co-
operation, worked in a very enthusiastic & honest manner so as to provide fruits of their work
to everyone without any selfishness and/or jealousy i.e. they were not concerned about their
earnings as compared to others. They focused on the welfare of the nation as a whole. So it
could be predicted at that time that our country will become one of the greatest economies in
the world and be at the top as regards developed country very soon, but sadly it did not
happen. There are many reasons behind it but the basic reason is the “Use of BLACK
MONEY” to a large extent in our country.

In Ancient times the ways to generate money as well as its usage was very transparent i.e.
everyone knew the sources of money and its application, which may be referred as WHITE
MONEY. So, in the past, White Money was in use but now the colour of Indian money has
changed to Black. Before discussing the use of black money one must know what Black
Money is.

Black money is one of the serious issues that is dealt in many countries and when talking
about a country like India it is one of the biggest issues. This issue is not a new issue for India
but an issue which has been in continuation since long back. Before understanding the core of
this issue one needs to understand its actual meaning. “Black money is money earned
through any illegal activity controlled by country regulations” Such money is earned usually
in cash from various activities and is not declared for paying tax. The term black money came
into existence in the early 20s’.  After the country started developing i.e. in the post-
independence period black money came under the limelight but now in the modern times,
black money has become a dominative issue in moulding the national policies, determining
new economic activities and sometimes determining the law of the country.

There are many reasons because of which black money is created in our country and
corruption is one of them. Corrupt practices such as taking or giving bribes, transactions in
black money done by bureaucrats, politicians, civil servants and high profile businessman
leads to the creation of black money. The transactions in black money are rarely caught
because of the high profile back-ups because of which the culprits are never caught by the

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government. Every person from every class such as from a B grade employee to a high
ranking officer of the government is involved in the creation of black money. Hundreds of
cases were registered regarding admission through forged certificates and documents in Delhi
University because of which the University came up with an idea of hiring forensic experts
for verifying the certificates and documents produced by the students during admissions.

LITERATURE REVIEW

Black Money in India has induced many empirical Studies. I am presenting a brief review of
the literature:

Sukanta Sarkar (2010) conducted a study on the parallel economy in India: Causes, impacts
& government initiatives in which he focused on the existence of causes and impacts of black
money in India. According to him, the main reason behind the generation of black money is
the Indian Political System i.e. Indian govt. just focused on making committees rather than to
implement it. So, he concluded that laws should be implemented properly to control black
money in our economy. CA Lalit Mohan Aggarwal (2012) edited the White Paper on Black
Money studied that violation of laws by central and state govt. leads to criminal activities
which in turn leads to generation of black money in Indian economy. Vijay Kumar Singh
presented a paper on controlling money laundering in India- problems & perspectives that to
control black money in India is very difficult task only due to the existence of one reason i.e.
poor implementations of laws which leads to sophisticated crime in the economy and thus
generates black money.

OBJECTIVES OF THE STUDY

1. To know the present status of black money in INDIA.

2. To Study the main reason behind the generation of black money.

3. To Study the Impacts of Black Money on Indian Economy.

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Defining ‘Black Money’

There is no uniform definition of black money in the literature or economic theory. In fact,
several terms with similar connotations have been in vogue, including ‘unaccounted income’,
‘black income’, ‘dirty money’, ‘black wealth’, ‘underground wealth’, ‘black economy’,
‘parallel economy’, ‘shadow economy’, and underground’ or ‘unofficial’ economy. ‘Black
money’ can be defined as assets or resources that have neither been reported to the public
authorities at the time of their generation nor disclosed at any point of time during their
possession.

According to National Institute of Public Finance and Policy (NIPFP) defines-

“Black Money is the aggregate of incomes which are taxable but not reported to authorities.”
Thus, in addition to wealth earned through illegal means, the term black money would also
include legal income that is concealed from public authorities:

 To evade payment of taxes (income tax, excise duty, sales tax, stamp duty, etc);

 To evade payment of other statutory contributions;

 To evade compliance with other laws and administrative procedures.

Generation of Black Money

It is generated through main two activities or means – Illegal means and Legal means

 It is earned through Illegal means such as drug trafficking, weapons trading, terrorism,
selling counterfeit or stolen goods etc.

 By Corruption which includes bribe given to and by public officers.

 Hiding income through Legal activities i.e. not reported to public authorities or we say to
the government for the purpose to evade taxes.

 Even commercial classes generate black money through Trade.

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From where is it used

In INDIA it is mainly used by ministers in Elections to promote their own interests. It is also
used in air travel, land, jewellery etc.

Who is involved in it?

List is never ending but to name few are Ministers, Liquor Traders, Top Industrialists, Senior
Officers, Chief Ministers, etc.

Scenario of Black Money in India

Almost every sector in our country generates and uses black money for its survival in the
market, society....etc. It includes Real estate, financial market, bullion & jewellery market,
non-profit organisations, external trade and so on. Apart from this, in India black money
persists due to the existence of Demonstration Effect i.e. the way to live a life in terms of
others point of view or we say live a life by looking at others livelihood. People of India are
very much affected by the lifestyles of other people of the society who are maintaining
considerable high status, and in turn want to be like them. For this, they want to generate
money by any means. Therefore to fulfil these desires or to maintain their status in society
they force themselves to generate and use black money.

Corruption in India is a major issue that adversely affects its economy. In 2014 India ranked
85th out of 175 countries in Transparency International's Corruption Perceptions Index,
compared to its neighbours Bhutan (30th), Bangladesh (145th), Myanmar (156th), China
(100th), Nepal (126th), Pakistan (126th) and Sri Lanka (85th) Another reason for the
existence of black money is the presence of Corruption in every field of the economy. For
example, 1. If any common man wants to get a job in any public institution like in a bank, or
any transport or educational institution etc., then he will have to pay adequate consideration
to the authority of that respective institution i.e. Bribe have to be paid. For this, common man
is forced to generate money by illegal means. In this way, we can say that, both, the public
authority and a common man generate and use black money in a considerable manner. 2.
Likewise, if a student wants to get admission in any big and reputed institution, he will have

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to pay some extra money other than fees in the form of Donations etc. 3. Also in some
Educational institutions, more fees are charged for examination forms or for practical which
is considerably higher than the quoted fees. In this way, black money is generated and used in
big and reputed educational institutions.

Present Status of Black Money In India

As we know, in the recent times the issue of black money and corruption has come into being
with participation of our civil society and parliament institutions. In this context two main
issues have come into being-

 Firstly, without any adequate factual basis, a large magnitude /amount of black money and
unaccounted wealth stashed abroad every year.

 Secondly, Govt. Response to address this issue has been inadequate or we say considerably
negligible.

Black Money of India in Swiss Accounts

India has slipped to 70th position in terms of foreign money lying with Swiss banks and
accounts for a meagre 0.10 per cent of total global wealth held in the country’s banking
system. An article in the reputed newspaper “The Hindu” in 2010 revealed that unofficial
estimates indicate that Indians had over US$1456 billion in black money stored in Swiss
banks (approximately USD 1.4 trillion). While some news reports claimed that data provided
by the Swiss Banking Association Report (2006) showed India has more black money than
the rest of the world combined, a more recent report quoted the SBA›s Head of International
Communications as saying that no such official Swiss Banking Association statistics exist.
Another report said that Indian owned Swiss bank account assets are worth 13 times the
country national debt. These allegations have been denied by the Swiss Bankers Association.
James Nason of Swiss Bankers Association in an interview about alleged black money from
India holds that “The (black money) figures were rapidly picked up in the Indian media and
in Indian opposition circles, and circulated as gospel truth. However, this story was a
complete fabrication. The Swiss Bankers Association never published such a report. Anyone

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claiming to have such figures (for India) should be forced to identify their source and explain
the methodology used to produce them.”

In a separate study by Global Financial Integrity concludes, “media reports circulating in

India that Indian nationals held around US$1.4 trillion in illicit external assets are widely off
the mark compared to the estimates found by their study.” The report claims that the amounts
are significantly smaller, only about 1.5% of India’s GDP on average per annum basis,
between 1948–2008. This includes corruption, criminal activities bribery and kickbacks,
trade mispricing and efforts to shelter wealth by Indians from India’s tax authorities.

According to a report, published in May 2012, Swiss National Bank estimates that the total
amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were CHF 1.95
billion (INR 92.95 billion, US$ 2.1 billion). The Swiss Ministry of External Affairs has
confirmed these figures upon request for information by the Indian Ministry of External
Affairs. This amount is about 700 fold less than the alleged $1.4 trillion in some media
reports. The report also provided a comparison of the deposits held by Indians and by citizens
of other nations in Swiss banks. Total deposits held by citizens of India constitute only 0.13
per cent of the total bank deposits of citizens of all countries. Further, the share of Indians in
the total bank deposits of citizens of all countries in Swiss banks has reduced from 0.29 per
cent in 2006 to 0.13 per cent in 2010. In 2011, according to the data provided by Swiss Bank,
India is topping the list almost $1500 billion of its black money deposited with them,
followed by Russia $470 billion. The amount of black money is increasing day by day at very
rapid speed.

According to Report published by SWISS NATIONAL BANK estimates total deposits as

below: From this analysis it is clear that India has a Top Position in case of black money
deposits.

COUNTRY MONEY
DEPOSITED
INDIA $ 1,456 billion
RUSSIA $ 470 billion
UK $ 390 billion
UKRAINE $ 100 billion

Source: Swiss Banking Association Report.

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We all know that black money is being generated by tax evasion through
unreported/shadow/hidden accounts and also by corruption and fake currency. Tax evasion is
being caused by the indirect result of high tax component on commodities and services,
multiple taxes, complex tax structures, cumbersome accounting and auditing. In the present
economic system, there is huge money in physical form (bills/notes). The percentage of
physical money may vary from country to country. There are reported to be plenty of cases of
lootings, robberies, homicides, extortions, ransoms, and bribes across the world in almost all
nations because of this huge money in physical form. This physical money, in huge amounts,
is being transferred from one hand to other eluding all tax nets in transactions of commodities
or goods. The unaccounted GDP is said to be too heavy and varies from country to country
depending upon the corruption level that exists in that country. In addition to this black
money there are also huge amounts of fake currency that has contaminated the genuine
currency. The combined effect of the black money and fake currency is playing havoc with
economies of many countries. Now money is being treated as an income generating asset and
wealth instead of using it as a medium in exchange of commodities, goods, services, and
shares, physical and intellectual works. The huge accumulation of money in few pockets in
the form of black money is making the cyclic circulation of money in the economic system to
be erratic (some times more cycles per year and sometimes less cycles per year) with
stagnation/non usage of money causing economic recession at times.

Impacts of Black Money on Indian Economy

The flow of black money can seriously affect the entire economic system of India. Some
important impacts are discussed here:

1. Less Tax for the Government – Many times, the Indian Government has failed to collect
the estimated amount of tax from the people of our country and for this, credit has to go to the
black money driven underground economy. Recently, a report was submitted to the Finance
Ministry of India that divides the spread of black money in different sectors like real estate,
mining, telecom etc. The study, headed by NIPFP chief P.Kavita Rao, explains how illicit
wealth is likely to exceed 10% of GDP.

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2. Uncontrollable Inflation - When black money is out in the market, the amount of money
in the system is higher than the Government expects. This causes the prices of commodities
to increase to a level beyond normal. This is a direct result of people having more money
offering more money on specific items. Even if the Government tries to control the credit
flow in the market by taking necessary measures, the amount of black money present upsets
the move, resulting in some sort of pressure on the economy.

3. Leads to Mass Poverty – The distribution of wealth and income in our country has been
severely affected by the growth of underground economy. The common people get affected
indirectly in so many ways. The tax evaders are keeping the money away from the deserved.
If all the black money in the tax havens is recovered and used by the Indian government, all
the outstanding liabilities of the country could be paid off and money would still be left for
spending.

4. Lack of Technology – Due to the existence of black money, India is facing the problem of
shortage of capital. This has the direct impact on the up gradation of technology in all sectors.
The major reason behind such backwardness is the parallel economy.

5. Impact on Growth by moving investments on Gold, Stones and Jewellery – People

who are looking to turn black money into white money are largely investing in precious
metals like Gold and other jewellery. There are people who believe that almost 70% of the
total gold investment in our country is black money. One reason for people to invest in gold
is that it is hard to trace. People in black market may buy gold bars, coins, jewelleries etc.
because one can buy gold easily and can be converted back to money anytime. This flow of
underground money has caused Indian economy to stall on its growth. It is estimated that if
all the money in the underground economy could be diverted to our main economy, our
economy would grow by more than thrice in no time.

6. Corruption - While corruption creates black money in the economy, it can also be a result
of the growing underground market. People with black money are able to bribe the
administrators and politicians to get what they want. By doing this, they are able to get what
they want and others are pushed down the stack.

7. Inflated Real Estate – When people with deep pockets are ready to pay more for a piece
of land, the price of surrounding land also tends to increase; thus artificially inflating the
prices of an entire area. Generally, people involved in black money market are always ready

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to pay more for a piece of land as this helps in converting their coloured money to legal
money.

8. Transfer of Indian Funds Abroad to Safe Heavens – The black money generated in
India is kept in foreign tax havens. For this, money has to be transferred from India to other
countries through secret channels. Under-invoicing of exports and over-invoicing of imports
are two of the main methods used by black money holders for transferring money overseas.

9. Encourages Anti-Social Activity – It is no doubt that black money is a curse to any

country. Black money is always promoting anti-social activities in the society. Bribery,
mentioned earlier, is only one example. The anti-social effects of black money include
activities like terrorism, a huge threat already to our country.

Government measures against black money

Over the last few years, government has intensified its fight against black money.
Several big and small measures were launched and cumulating together, all these
form a coordinated strike against black money. It is well recognized that black
money generated in the country are stored mostly in India though a part of those is
held in overseas as well. Hence, efforts on both fronts - domestic and foreign stored
black money were made by the government.

A. Black Money stored in foreign countries and government measures against them

Government has made several measures to fight black money parked in other
countries. These include:

 Undisclosed Foreign Income and Assets Act 2015

 Signing of Automatic Exchange of Information and tax information

exchange agreements with countries like Switzerland.

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 Modifying Double Taxation Avoidance Agreements with countries like

Mauritius

 Putting more regulation on Participatory Notes

(1) The Undisclosed Foreign Income and Assets Act 2015 imposed penalty and tax
on foreign income and asset holders by providing a disclosure window. The scheme
had only limited achievement with just Rs 4200 crore black money revelation.

(2) Automatic exchange of information involves the systematic and periodic

transmission of “bulk” taxpayer information by the source country to the residence
country concerning various categories of income (e.g. dividends, interest, etc.). The
AEOI was signed under the G20 framework and India is a signatory.

 Role of Participatory Notes and FDI Round tripping: Measures taken by

the government

Black money of Indians kept in foreign countries is a higher order problem. First is
that it shows the ability of the affluent class to drain out money and successfully
deploy in overseas without getting the notice of the tax authorities. Secondly, a
more important outcome is that they are able to bring back this black income into
India through two important channels- Participatory Notes and Round Tripping
FDI.  

Government has made two sets of initiatives on these two

(1) Modifying Double Taxation Avoidance Agreements and

(2) More regulations on Participatory Notes.

Large scale investment from tax haven countries or those have DTAAs with India
shows black money is making its return to India. Bulk of the FDI is coming through
Mauritius. Similarly, considerable portion of FPI is coming through Singapore.

 Measures against participatory notes

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SEBI on July 8, 2017, has banned FPIs from the issue of Participatory Notes for
investing in equity derivatives. The PFIs can issue PNs for hedging the equity
shares held by them. The main purpose of PNs were to invest in Indian equity
derivatives. Hence, the removal of PNs for subscribing equity derivatives will make
the PN route almost useless. Previously, the PNs were the major instrument for least
disclosed foreign investors to make investment in the Indian stock market.  

SEBI has proposed an increase in disclosure requirements and restricted transfer of

participatory notes to curb money laundering. According to SEBI, the transfer of P-
Notes will be restricted and allowed only after prior consent of the issuer. This
means that for every downstream transfer of a P-Note, prior consent of the issuer
would be needed.

 Restructuring of India-Mauritius DTAA to check round tripping

Government has restructured India-Mauritius DTAA by taking right to impose

capital gains tax in India (source country). In this way, other DTAAs with countries
like Singapore, Cyprus etc., also will be modified.

 Foreign Exchange Data transfer to investigation agencies:  The Special

Investigation Team on black money proposed the RBI to transfer foreign
exchange transactions data to Enforcement Directorate and Directorate of
Revenue Intelligence. Additionally, FET–ERS data should capture the PAN
number of the importer or the exporter.

Foreign Exchange Transactions Electronic Reporting System (FET-ERS) – IDPMS

(Import Data Processing and Monitoring System) and EDPMS (Export Data
Processing and Monitoring System) are databases about foreign currency
dealings. Under FET-ERS, all authorized dealers are obligated to report each
foreign exchange transactions (inward and outward remittances in FET–ERS) to the
RBI. 

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B. Fight against domestic black money

It is estimated that nearly 95% of the black income generated in India are stored
within the country. Physical assets, real estate, illegal activities etc., are some of the
areas where black money and parallel economy concentrates. The major initiatives
against black money within India are:

1. Income Disclosure Scheme 2016

The scheme launched on 1 st  June 2016 with the starting of a three-month declaration
window. People and entities can reveal black money earned till 2016 and convert
them into white money by paying 45% payment including tax plus surcharge and a
penalty.  

2. PAN has been Mandatory for high value transactions

Permanent account number (PAN) is now quoted compulsorily for all transactions
above Rs.2 lakh from January 2016 and will be applicable on all sale and purchase
of goods and services and for all modes of payment.

PAN is already a must for almost all financial sector transactions, car purchases and
to buy immovable property above a certain limit. Similarly, PAN is mandatory for
the purchase of cash or prepaid cards amounting to Rs. 50,000 or more in year.

The monetary limit for quoting PAN for sale or purchase of immovable property has
been raised to Rs.10 lakh from Rs.5 lakh.

PAN will also be mandatory for the purchase or sale of shares of an unlisted
company amounting to Rs.1 lakh.

3. Amendment to Benami Property Prohibition Act 2016: by providing broader

and clearer coverage and stricter penal provisions. 

4. Demonetisation of Rs 500 and Rs 1000 notes:

This step will destroy black money held in the form of cash.

5. Promotion of cashless transaction

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Several efforts were made by the government and the RBI to encourage cashless
transactions. Card based transactions or digital transactions automatically uploads
transaction details under the PAN Card. Such a system will reduce the scope of
black money.  National Payment Corporation’s Rupay Card, UPI, BHIM, Adhaar
Enabled Payment System etc. are government initiatives for cashless transaction
economy.

6. Operation Clean Money: Launched by CBDT to track black money accounts

caught during the demonetisation period. 

7. Pradhan Mantri Garib Kalyan Yojana: Scheme for tackling black money
revealed under the Demonetisation period. 

8. Putting limit on physical cash settlement. Exchange of cash above Rs 3 lakh

has been prohibited. Similarly, banks can give only Rs 2 lakh through physical cash
to customers.

9. Tax Administration measures: Aadhar -PAN linkage, TDS, Presumptive

Taxation etc.

10. Constitution of the Special Investigation Team on Black Money.

11. The Central Economic Intelligence Bureau and Financial Intelligence Unit:

It was set up with the intention to make economic intelligence, monitoring and
fighting economic offences such as smuggling, money laundering tax evasion and
fraud.

The CEIB is an important part of the Economic Intelligence Council which is

responsible for coordination, strategy and information-sharing amongst the
government agencies responsible for intelligence and control of economic offences
such as smuggling, money laundering tax evasion and fraud. Finance Ministry is the
nodal ministry for Economic Intelligence Council. 

12. Government imposed penalty on real estate cash transactions above Rs 20000.

13. Voluntary Disclosure Scheme: The Government may adopt the policy that those who
voluntarily disclose their black income of the past to the taxation authorities will not be

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punished and penalties may be waived or minimized. The following image shows the amount
of undisclosed income detected during the period 2006-2012.1

14. Raids: Income tax department’s powers have to be considerably enlarged and it should
be empowered to conduct raids on the premises and properties of the taxpayers or any other
individuals and can seize the unaccounted income and wealth and take necessary legal
actions against the tax evaders.

 15. Rewards and Awards: In order to encourage the honest taxpayers and create a positive
attitude in the minds of the people towards the payment of tax, this can be adopted. The
income tax department has introduced a special award scheme for the first time in Tamil
Nadu for the 1994-95 assessment year, to encourage and recognize prompt tax payers and
also create greater awareness in the minds of tax paying public.

It is called as “Good Taxpayers Award” Scheme. The various categories considered for the
awarded scheme are: public and private sector companies, firms (both business and
profession), individuals, and Hindu undivided families (both business and professions).

The other qualifications considered for the purpose of the award are that

the person concerned should not only pay the highest tax but should also file the returns in
time,

prompt payment of taxes including self-assessment tax without default,

no penalty for concealment of income should have been levied,

no prosecution for offenses under the Direct Taxes Act and related provision of IPC should
have been launched,

no search undertaken under the Direct Tax laws should have been conducted, and should
have been co-operative with the department in the completion of assessments.

1
Whitepaper on Black Money, www.finmin.nic.in

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Besides the above, no official patronage or recognition or awards should be given to persons
who have been penalized for keeping the black money or in whose case prosecution
proceedings have been taken.

16. Publicity: In view of the deterrent effect, the nature of all persons in whose cases
penalties have been imposed for the concealment of income, wealth etc. should be published
in the gazette as well as in the press, giving details of their names, addresses and the amount
of penalties etc. If the assessee is a company or firm, the names of all the Directors of the
Company or Partners of the firm should be published.

17. Vigorous Prosecution: The Wanchoo Committee also recommended that the department
should completely reorient itself to a more vigorous prosecution policy in order to instill a
wholesome respect for the tax-laws in the minds of the taxpayers.

18. Special Bearer Bonds: In 1981 and 1991 the Government has introduced a scheme of
Special Bearer Bonds to drag black money into the treasury’s coffer. It is advocated to
unearth black money. But it is to be modified suitably according to the prevailing economic
conditions.

19. Arousing Public Conscience: A special drive should be undertaken to arouse public
conscience by enhancing the co-operation of the leaders in various walks of life.

20. Other Measures:

People should be educated with regard to real object of collections of taxes through press,
radio, TV, and films.

Steps should be taken to convince the taxpayers that the money collected through taxes is not
spent wastefully but put to proper use.

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CONCLUSION

This paper presents the different aspects of black money and its relationship with policy and
administrative measures in our country. It also reflects the policy and strategies that the
Government has been pursuing in the context of recent initiatives, or need to take up in the
near future, in order to address the issue of black money and corruption in public life. There
is no doubt that existence of black money has a significant impact on social, economic and
political levels of our lives which has a significant effect on the institutions of governance
and conduct of public policy in the country. So we can’t say that India is a poor nation. In
fact, India is amongst the Richest Nations if Stashed Black Money is brought back &
converted to White Money and fresh generation of Black Money is put to an end.

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SUGGESTIONS

After studying the concept of black money & its various sources of generation in our
country, it’s time for suggestions that may help to control black money in India. These are as
follows:

 Our Government should make its foremost objective to control black money in our
country.

 E-Governance should be started by the Government i.e. the use of technology be made as
far as possible like E-Registration with Revenue Authorities, E-Filing of Returns, etc.
because more

 The involvement of human beings more is involvement of corruption, ultimately generating

Black Money.

 Agriculture income should be taxed for those who have both the agricultural as well as non-
agricultural income.

 Black money revolves around in cash only so the Government should put restriction on
cash transactions wherever possible and instead should increase the use of Plastic Money like
Debit Cards, Credit Cards, etc. and by other such means.

 The Government should not give absolute power of work to any one person as it creates
monopoly and instead should segregate the work among many persons.

 The tax rates should be made helpful to some extent in solving this problem. For this
purpose tax rates should be lowered.

 Tax evasion should be checked by plugging loop-holes in tax system.

 All the aspects of its generation should be looked into and stopped.

 Competitive bids should be motivated.

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References

1. CA Lalit Mohan Agarwal (2012), edit. “White Paper on Black Money”, Journal of
Securities Academy & faculty for e-education, vol.72.

2. Kavita Rani & Dr. Sanjiv Kumar (Jan, 2014). “Black Money In India – A Conceptual
Analysis” Indian journal of Research, Volume 3, Issue1

3. Report on Aspects of Black Money, The National Institute Of Public Finance And
Policy,1985
4. Report on “Measures to Tackle Black Money In India And Abroad”, Government Of
India, Ministry Of Finance, 2012 (Report of committee headed by Chairman CBDT,
Parts I & II)

5. Sukanta Sarkar (2010). “The parallel economy in India: Causes, impacts & government
initiatives”. Economic Journal of Development Issues, Volume 11-12 no.(1-2) p.124-134.

6. Black Money in Real Estate Sector, A Study, NIPFP, January 1995

7. Centre for Central Banking Studies, Handbook – No. 32 Understanding the central bank
balance sheet, Garreth Rule, 2015 Bank of England
8. Vijay Kumar Singh, (January 2009) “Controlling money laundering in India– problems &
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9. A Study of Issues And Challenges Of Tackling Black Money Menace In India Prof. Dr.
Rahul Goyal, Dr Parul Saxena, ISJTM Vol. 5 Issue 8 Aug 2016
10. The Shadow Economy in Europe, 2013, Friedrich Schneider, (A. T.)

11. White paper/may 2012/ Black money/Ministry of finance, department of revenue. New
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12. The Times of India/Black money government Submits names, files & status report/html

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13. www.encyclopedia.com/wiki/corruption in india.html

14. www.worldpress.com/my economist/ Black money in Swiss Bank.html

15. http://ijsetr.org/wp-content/uploads/2013/08/IJSETR-VOL-1-ISSUE-5-145-153.pdf

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