CHAPTER 1-

INTRODUCTION

1
 ➢ Introduction:

Black money is a term used to refer to money that is not fully legitimate in the hands of the
owner. The term "black money" is not defined per se in the tax laws. However, a definition of
black money was adopted in the White Paper issued on Black Money by Government of
India in May 2012.

As per the above report, ‘black money’ is 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.

Black money could arise broadly due to two possible reasons. The first is that the money may
have been generated through illegitimate activities not permissible under the law, like crime,
drug trade, terrorism, and corruption, all of which are punishable under the legal framework
of the state. Some of these offences are included in the schedule of the Prevention of Money
Laundering Act, 2002. Money laundering, as defined by Financial Action Task Force (FATF),
is the processing of these criminal proceeds to disguise their illegal origin.

The second and perhaps more likely reason is that the wealth may have been generated and
accumulated by failing to pay the dues to the public exchequer in one form or other. In this
case, the activities undertaken by the perpetrator could be legitimate and otherwise
permissible under the law of the land but s/he has failed to report the income so generated, or
comply with the tax requirements, or pay the dues to the public exchequer, thereby
converting such income into black money.

The definition of black money used in the White Paper is in consonance with the definition
used by the National Institute of Public Finance and Policy (NIPFP)in its 1985 report on
Aspects of Black Economy, wherein it defined ‘black income’ as ‘the aggregates of incomes
which are taxable but not reported to the tax authorities’.

Because of deliberate, false reporting of incomes/output/ transactions national income and

output of the country gets underestimated and hence, decisions based on such calculations
tend to be faulty.

The total amount of black money deposited in foreign banks by Indians is unknown. Some
reports claim a total of US$10.6 – $11.4 trillion is held illegally in Switzerland.[2] Other
reports, including those reported by the Swiss Bankers Association and the Government of
Switzerland, claim these reports are false and fabricated, and the total amount held in all

2
Swiss bank accounts by citizens of India is about US$2 billion.[3][4] In February 2012, the
director of India's Central Bureau of Investigation said that Indians have US$500 billion of
illegal funds in foreign tax havens, more than any other country.[5][6] In March 2012, the
government of India clarified in its parliament that the CBI director's statement on $500
billion of illegal money was an estimate based on a statement made to India's Supreme Court
in July 2011.

In March 2018, it was revealed that the amount of Indian black money currently present in
Swiss and other offshore banks is estimated to be ₹300 lakh crores or US$4 trillion.

➢ Black money lying abroad in foreign jurisdictions

The Finance Minister, in his budget speech of 2015-16, had conveyed the decision of the
Government to enact a comprehensive new law on black money to specifically deal with
black money stashed away abroad. In the Undisclosed Foreign Income and Assets
(Imposition of Tax) Bill, 2015 later introduced in the Parliament on 20.03.2015, the words
corresponding to black money is "undisclosed income and assets".

➢ Unaccounted income in the domestic territory:

Union Budget 2016-17 proposed a limited period Compliance window for domestic
taxpayers to declare undisclosed income or income represented in the form of any asset and
clear up their past tax transgressions. This will include paying tax at 30% and surcharge at
7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Regarding
income declared in these declarations, there will be no scrutiny or enquiry under the Income
Tax Act or the Wealth Tax Act and the declarants will have immunity from prosecution.
Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to
certain conditions .Government of India plans to open the window under this Income
Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay amount due
within two months of declaration.

Subsequent to the Income declaration scheme, as a step forward to curb black money, bank
notes (currency) of existing series of denomination of the value of Rs.500 and Rs.1000 have
been declared as not legal tender and is being withdrawn from circulation since the midnight
of 8 November 2016. The Taxation Laws (Second Amendment) Bill, 2016 was introduced in
the Parliament to amend the provisions of the Income Tax Act to ensure that defaulting assess
are subjected to tax at a higher rate and stringent penalty provision. Another amnesty scheme

3
was also provided alongside the demonetization initiative. Further, in the Union Budget
2017-18, several measures are unveiled for curbing the flow /generation of black money, such
as introduction of electoral bonds, abolition of cash payments above Rs. 3 lakh, putting a ban
on cash donations above Rs. 2000 to political parties, limit of cash donations to charitable
organisations to Rs. 2000 from the earlier Rs. 10000, plugging the loopholes in respect of
manipulation of long term capital gains tax benefits etc. Details may be seen at Annexure III
to Part B of the Budget Speech.

Central Board of Direct Taxes (CBDT) has started publishing the summary statistics on direct
tax payments by individuals companies etc., which may be seen here.

➢ Sources of black money:

The root cause for the increasing rate of black money in the country is the lack of strict
punishments for the offenders. The criminals pay bribes to the tax authorities to hide their
corrupt activities. Thus, they are rarely punished by the judge. The criminals who conceal
their accounts from the government authorities include big politicians, film stars, cricketers,
and businessmen. Some Indian corporations practice transfer mispricing, by under-invoicing
their exports and over-invoicing their imports from tax haven countries such as Singapore,
UAE, and Hong Kong. Thus, the promoters of the public limited companies who hold rarely
more than 10% of share capital, earn black money abroad at the cost of majority share
holders and tax income to the Indian government.[9] By the year 2008, the cumulative Illicit
Financial Out flows from the country touched US$452 billion.

Political organizations, corrupt politicians and government officials take bribes from foreign
companies then park or invest the money abroad in tax havens for transferring to India when
needed. In addition, locally earned bribes, funds and collections are often routed abroad
through hawala channels in order to evade Indian tax authorities and consequent legal
implications.

In the Vodafone-Hutchison tax case, a foreign multinational company also evaded tax
payments in India by making transactions with shell companies registered in tax haven
countries.

The unlawfully acquired money kept abroad is routed back to India by the round tripping
processes. Round tripping involves getting the money out of one country, sending it to a place
4
like Mauritius and then, dressed up to look like foreign capital, sending it back home to earn
tax-favoured profits.

5
 CHAPTER 2:-
INDUSTRY PROFILE

6
 • Industry Profile :-

1)Real Estate Sector: The real estate sector and its association with black money have
been a long-standing concern in many countries, including India. Black money refers to
income that is not declared to the government for tax purposes, and it is often earned through
illegal means or underreporting of financial transactions. The real estate sector provides a
fertile ground for the generation and investment of black money due to several factors.

2)The constitution industry:

The construction industry, like many other sectors, has had its share of issues related to black
money. Black money, often associated with unaccounted or illegal funds, can find its way
into the construction industry through various means. In this discussion, we'll explore the
dynamics of black money in the construction sector, the impact it has, and measures to
combat it.

3)Manufacturing and small-scale industries:

The construction industry's susceptibility to black money is a complex issue with far-reaching
consequences. Its prevalence distorts economic realities, reduces tax revenues, and impacts
fair competition. Combating black money in construction necessitates a multi-pronged
approach involving regulatory reforms, digitalization, and international cooperation. Only
through these concerted efforts can the industry become more transparent, accountable, and
ultimately benefit society as a whole.

4)The Agricultural Sector:

The agricultural sector and its relation to black money is a complex and multifaceted issue
that requires a detailed examination. Black money refers to income that is not declared to the
government for tax purposes and is often obtained through illegal means. In the context of
agriculture, this issue raises several concerns, as it has significant implications for the
economy, society, and the overall well-being of a country.

7
One of the primary reasons for black money in the agricultural sector is underreporting of
income. Many agricultural activities are carried out in the informal sector, making it easier
for individuals and businesses to evade taxes.

5)Informal Trade:

Informal trade, also known as the underground or shadow economy, refers to economic
activities that occur outside the formal channels of government regulation and oversight.
These activities often lack the transparency, documentation, and regulation associated with
formal trade. Informal trade includes a wide range of activities, from small street vendors to
unregistered businesses and cross-border smuggling.

a)Black money: refers to income that is unaccounted for, untaxed, or concealed from the
government and tax authorities. This income may be generated through legal or illegal
means, but it is hidden to evade taxes and legal obligations. Some important characteristics of
black money include:

6)The luxury goods and jewellery market's:

The luxury goods and jewellery market's association with black money is a complex issue,
often intertwined with issues of tax evasion, money laundering, and illicit financial activities.
In this 500-word explanation, we will delve into the key aspects of this relationship, its
implications, and the measures taken to mitigate these problems.

The connection between luxury goods and black money primarily arises due to the high-value
nature of these products. Luxury watches, designer clothing, high-end automobiles, and,
notably, jewellery have long been vehicles for hiding and investing black money.

7)Hawala: Hawala is an informal and often illegal method of transferring money, and it is
commonly associated with black money. Here's a detailed explanation:

➢ Hawala System: Hawala is an alternative remittance system used to transfer funds

from one location to another without actually moving the physical currency or
involving traditional banking channels.

8
 ➢ Working of Hawala: Suppose someone wants to send money from Country A to
Country B. They approach a local hawala broker in Country A and provide the
amount they wish to send.
➢ Anonymity: Hawala transactions are generally anonymous and require little to no
documentation, making it attractive for those involved in illegal or underground
activities. This anonymity is why hawala is often associated with black money.
➢ Black Money: Black money refers to unaccounted-for or untaxed income that
individuals or businesses earn through illegal or undisclosed means. It can include
income from activities like tax evasion, corruption, money laundering, and illegal
businesses.

8)Money Laundering: Money laundering is a complex process used to disguise the

origins of illegal or "black" money and make it appear as if it comes from legitimate sources.
Here's a detailed explanation of money laundering.

9
 CHAPTER 3:-

SCOPES AND OBJECTIVES

10
SCOPES:

➢ Tax Evasion: To individuals and businesses underreport their income or engage in

fraudulent tax practices to avoid paying taxes.

➢ Corruption: to bribery, kickbacks, and embezzlement of public funds contribute to

the generation of black money.

➢ Smuggling: To illicit trade in goods, including narcotics, weapons, and contraband,

generates black money.

➢ Money Laundering: To know the process of legitimizing illegal funds through

complex financial transactions and investments.

➢ Offshore Accounts: To stashing money in foreign bank accounts to evade domestic

taxes and scrutiny.

➢ Real Estate Transactions: To underreporting property values in real estate deals to

evade taxes.

➢ Hawala Transactions: To informal and often illegal money transfer systems used
for moving funds across borders.

➢ Shell Companies: To fictitious or dormant companies used to hide the true

ownership and sources of income.

11
➢ Underreporting of Sales: To know the Businesses understate their sales to reduce tax
liability.

➢ Informal Labor: To understand the Payment of wages to workers "off the books" to
evade taxes and labour regulations.

➢ Illegal Trade: To know profits from the sale of illegal goods, such as counterfeit
products.

➢ Underreporting Agricultural Income: To know Farmers may underreport their

agricultural income to avoid taxes.

➢ Insider Trading: To legal trading of securities using non-public information,

resulting in black money gains.

➢ Smurfing: to breaking down large transactions into smaller ones to avoid suspicion
and reporting requirements.

➢ Unaccounted for Political Funding: To know contributions to political parties

that are not properly disclosed.

12
OBJECTIVES:

➢ To find the harmful effect of the black money and corruption in India.

➢ To measures to undertake to reduce black money.

➢ To understand the steps to eliminate black money in Inda.

➢ To increase government revenue through the proper taxation of all economic

activities.

➢ To promote financial transparency and accountability to discourage hidden wealth.

➢ To tackle corruption by reducing the incentives for bribery and embezzlement.

13
 CHAPTER 4:-

NEED TO THE STUDY

14
 ❖ Need to the study of black money:
• Black money refers to funds earned through illegal activity or legal income
that is not recorded for tax purposes. It is a significant problem in many
countries, including India, where it is estimated to account for a large portion
of the country's GDP
• Definition: Black money is money on which tax is not paid to the
government. It can be earned through illegal activities such as drug trafficking,
smuggling, and corruption, or through legal means such as underreporting
income or not recording sales
• i) Impact: Black money has several negative effects on the economy and
society. It reduces tax revenue, which can lead to a lack of funding for public
services such as healthcare and education.
• ii)Causes: The causes of black money are complex and varied. They include
corruption, tax evasion, and a lack of transparency in financial transactions. In
some cases, oppressive laws or regulations can also contribute to the
generation of black money
• iii)Solutions: There are several measures that can be taken to reduce the
generation of black money. These include improving tax administration and
enforcement, increasing transparency in financial transactions, and reducing
the use of cash in the economy.
• Iv)Examples: India is one country where black money is a significant problem.
Estimates suggest that it accounts for a large portion of the country's GDP, and
the government has implemented several measures to combat it, including
demonetization and the introduction of a goods and services tax other
countries, such as Switzerland and the Cayman Islands, are known for their
role in facilitating the generation of black money through offshore banking
and tax havens.

15
 Chapter 5:-

Data Collection

16
 ❖ Primary data: -

Black money, a term often shrouded in secrecy and controversy, refers to income generated
through illegal or unreported means, evading taxation and regulatory authorities. The primary
data concerning black money is challenging to obtain due to its hidden nature, but it remains
a critical issue for governments worldwide. One primary source of black money is the
underground economy, where transactions occur off the books. This encompasses various
activities, such as undeclared labour, cash-in-hand payments, and illicit trade in goods and
services. These transactions create a parallel financial system that operates beyond the
oversight of tax authorities.

❖ Secondary data: -

Black money, often referred to as illicit or unaccounted wealth, is a pervasive issue in many
economies worldwide. It encompasses income or assets that are not disclosed to the
government for tax purposes, typically hidden to evade taxes or launder money obtained
through illegal activities. The collection of accurate data on black money is a challenging task
due to its clandestine nature. However, various studies and estimates have shed light on the
magnitude of this problem. One prominent source of secondary data on black money is
research conducted by international organizations, such as the Global Financial Integrity
(GFI) and the Organisation for Economic Co-operation and Development (OECD).

17
 CHAPTER 6 :-

DATA ANALYSIS AND DATA

INTERPRETATION

18
 1) Which global organisation works to combat Money laundering and terrorism
financing?

INTERPRETATION

• The total number of responds 20 and 7 respondents prefer the WHO

• The total number of responds 20 and 7 respondents prefer the UNESCO
• The total number of responds 20 and 3 respondents prefer the INTERPOL
• The total number of responds 20 and 3 respondents prefer the FATF

19
 2) Can the presence of black money in an economy hinder its overall development?

INTERPRETATION

• 14 out of 20 respondents think that the presence of black money in an

economy hinder its overall development
• 6 out of 20 respondents think that the presence of black money in an
economy hinder its overall development

20
 3) Which country is famous for its banking secrecy and alleged involvement in hiding
black money?

INTERPRETATION

• The total number of respondents are 20 and 5 respondents prefer Switzerland

• The total number of respondents are 20 and 6 respondents prefer Japan
• The total number of respondents are 20 and 5 respondents prefer Brazil
• The total number of respondents are 20 and 4 respondents prefer Austrelia

21
 4) Is combating black money a priority for money governments to enhance
transparency and revenue collection?

INTERPRETATION

• 11out of 20 respondents think that the combating black money a priority for
money governments to enhance transparency and revenue collection

• 9 out of 20 respondents think that the combating black money a priority for
money governments to enhance transparency and revenue collection

22
 5) What is the penalty for tax evasion in many countries?

INTERPRETATION

• The total number of respondents are 20 and 4 respondents prefer the A warming
• The total number of respondents are 20 and 6 respondents prefer the Community
service
• The total number of respondents are 20 and 5 respondents prefer the Fines of
imprisonment
• The total number of respondents are 20 and 5 respondents prefer the Tax cuts

23
 6) What is the term for that is concealed to avoid taxation?

INTERPRETATION

• The total number of respondents are 20 and 5 respondents prefer the Hidden Income
• The total number of respondents are 20 and 8 respondents prefer the Invisible Income
• The total number of respondents are 20 and 3 respondents prefer the Tax free income
• The total number of respondents are 20 and 4 respondents prefer the Undisclosed
income

24
 7) Which technology has been used uncover hidden assets and black money?

INTERPRETATION

• The total number of respondents are 20 and 3 respondents prefer the Artificial
• The total number of respondents are 20 and 7 respondents prefer the Blockchain
• The total number of respondents are 20 and 6 respondents prefer the virtual reality
• The total number of respondents are 20 and 4 respondents prefer the genetic
engineering

25
 8) Which sector used often used hawala transaction to move black money?

INTERPRETATION

• The total number of respondents are 20 and 3 respondents prefer the Tourism
• The total number of respondents are 20 and 8 respondents prefer the Finance
• The total number of respondents are 20 and 4 respondents prefer the Real estate
• The total number of respondents are 20 and 5 respondents prefer the Agriculture

26
 9) Which country introduced the “know your consumer” (KYC) regulations to
prevents money laundering?

INTERPRETATION

• The total number of respondents are 20 and 6 respondents prefer the USA
• The total number of respondents are 20 and 10 respondents prefer the India
• The total number of respondents are 20 and 3 respondents prefer the SW
• The total number of respondents are 20 and 1 respondent prefer the Canada

27
 10) What is black money?

INTERPRETATION

• The total number of respondents are 20 and 4 respondents prefer the money that is
colored black
• The total number of respondents are 20 and 4 respondents prefer the money earned
through legal incomes
• The total number of respondents are 20 and 7 respondents prefer the undisclosed
income that is not taxed
• The total number of respondents are 20 and 5 respondents prefer the cureency used in
informal economy

28
 11) Which term is often used interchangeably with black money?

INTERPRETATION

• The total number of respondents are 20 and 8 respondents prefer the Grey money
• The total number of respondents are 20 and 5 respondents prefer the Red money
• The total number of respondents are 20 and 4 respondents prefer the Blue money
• The total number of respondents are 20 and 3 respondents prefer the Green money

29
 12) Is money laundering often associated with the concealtment it black money?

INTERPRETATION

• 11 out of 19 respondents think that the money laundering often associated with the
concealment it black money.
• 8 out of 20 respondents think that the money laundering often associated with the
concealment it black money.

30
 13) Does the existence of black money contribute to tax evasion?

INTERPRETATION

• 10 out of 19 respondents think that the existence of black money contribute to tax
evasion

• 9 out of 19 respondents think that the existence of black money contribute to tax
evasion

31
 14) Is black money illegal form of wealth that is not reported to tax authorities?

INTERPRETATION

• 5 out of 20 respondents think that the black money illegal form of wealth that is not
reported to tax authorities.
• 15 out of 20 respondents think that the black money illegal form of wealth that is not
reported to tax authorities.

32
 15) In which sector is black money most commonly found?

INTERPRETATION

• The total number of respondents are 20 and 6 respondents prefer the Agriculture
sector
• The total number of respondents are 20 and 6 respondents prefer the Manufacturing
Sector
• The total number of respondents are 20 and 8 respondents prefer the Real Estate
Sector
• The total number of respondents are 20 and no one will prefer the Informational
Technology sector

33
CHPATER 7:-

CONCLUSION

34
Conclusion: Black money, often shrouded in secrecy and controversy, is a term used to
describe money that is earned through illegal or illicit means and is not reported to the
government for taxation. It is a global issue with severe economic, social, and political
implications. In this 500-word explanation, we will delve into the concept of black money, its
causes, consequences, and measures to tackle this problem.

Black money is primarily generated through activities such as tax evasion, corruption,
smuggling, money laundering, and underground economic transactions. These activities
enable individuals and businesses to accumulate wealth without paying their fair share of
taxes, thereby depriving governments of vital revenue. The existence of black money
undermines the integrity of financial systems, hinders economic growth, and exacerbates
income inequality.

The causes of black money are multifaceted. One of the main drivers is a complex tax
structure that provides incentives for tax evasion. High tax rates, excessive regulations, and
bureaucratic inefficiencies often lead individuals and businesses to resort to illegal means to
reduce their tax liabilities. Corruption within the government and private sectors also
contributes to the generation of black money. Bribery, embezzlement, and other corrupt
practices foster an environment where individuals and businesses can operate in the shadows.

The consequences of black money are significant and far-reaching. Economically, it results in
revenue losses for governments, which can lead to budget deficits and increased borrowing,
ultimately burdening taxpayers. The underground economy fuelled by black money can
distort market competition, hinder foreign investments, and reduce overall economic
productivity. Socially, black money perpetuates income inequality, as the wealthy often evade
taxes while the average citizen bears the tax burden. This can lead to social unrest and erode
public trust in the government and institutions. Moreover, it facilitates the financing of illegal
activities such as terrorism and organized crime.

35
CHAPTER 8:-

SUGGESTIONS

36
Suggestions :-

➢ Digitization: Mandatory digitization of all land and property records linked to

PAN/Aadhaar can help reduce black money
➢ Simplification of account opening: Ensure that even petty shop people deposit
their cash sales into a bank account. Account opening should be simple and
easier
➢ Removal of prohibition and liberalization of the market: The only way to
dismantle black markets is by removing prohibition and liberalizing the
market. Once the market is liberalized, those daring entrepreneurs who were
earlier operating in the black market will move to the white market
➢ Reduction of corruption: Measures to reduce corruption can help reduce the
generation of black money. It is important to note that engaging in activities
related to black money is illegal and unethical. It is important to follow the
laws and regulations set by the government and pay taxes on all income
earned.

37
 QUESTIONNNARIE

❖ What is black money?

a) Money that is coloured black

b) Money earned through legal means

c) Undisclosed income that is not taxed

d) Currency used in the informal economy

❖ Which term is often used interchangeably with black money?

a) Grey money

b) Red money

c) Blue money

d) Green money

❖ In money laundering often associated with the concealment it black

money?

a) Yes

b) No

❖ Does the exist that is existence of black money contribute to tax evasion ?
a) Yes
b) No

38
❖ Is black money illegal form of wealth that is not reported to tax
authorities?
a) Yes
b) No

❖ In which sector is black money most commonly found?

a) Agriculture

b) Manufacturing

c) Real Estate

d) Information Technology

❖ Which global organization works to combat money laundering and

terrorism financing?

a) WHO

b) UNESCO

c) INTERPOL

d) FATF

❖ Which country is famous for its banking secrecy and alleged involvement
in hiding black money?

a) Switzerland

b) Japan

c) Brazil

39
 d) Australia

❖ Can the presence of black money in an economy hinder its overall

development?
a) Yes
b) No

❖ What is the penalty for tax evasion in many countries?

a) A warning

b) Community service

c) Fines or imprisonment

d) Tax cuts

❖ What is the term for income that is concealed to avoid taxation?

a) Hidden income

b) Invisible income

c) Tax-free income

d) Undisclosed income

❖ Which technology has been used to uncover hidden assets and black
money?

a) Blockchain

b) Artificial

c) Virtual reality

d) Genetic engineering

40
❖ Which sector often uses hawala transactions to move black money?

a) Tourism

b) Finance

c) Real estate

d) Agriculture

❖ Which country introduced the "Know Your Customer" (KYC) regulations

to prevent money laundering?

a) USA

b) India

c) Switzerland

d) Canada

41
Bibliography

42
https://survey2connect.com/survey-questions/survey-questions-for-banks/
https://www.iba.org.in/objective.html
https://www.wikipedia.org/
https://www.iba.org.in/objective.html
https://www.apnaplan.com/axis-bank-happy-ending-home-loan-review/
https://www.imf.org/en/News/Articles/2017/08/15/sp060117-evolving-risks-evolving-
response
https://www.wallstreetmojo.com/bank-regulation/

43