BLACK MONEY

IN INDIA

-Samarth Dixit (151296)

-Ashutosh Singh(151302)
-Mudit Arya (1512305)
-Siddhesh Sharma(151298)
PREVIEW :
● Introduction.
● Sources of Black money.
● Tax havens
● Impacts of Black money.
● Proposals to prevent Black
Money generation.
● Demonetisation
● Conclusion
 INTRODUCTION:
● WHAT IS BLACK MONEY?

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 and untaxed cash generated by
dealings in a black economy, black market, or
organized crime.
● India’s Black Money Problem
● In the Indian context, as far back as 3rd century BC, Kautilya’s book
‘Arthashastra’ refers to different types of taxes and the punishments as a
countermeasure for evading them.

● In independent India, which started with high aspirations but with socialist
leanings had most sectors of economy nationalised in the hands of govt.

● This led to scandalous politicians, corrupt officials/bureaucrats & dishonest

industrialists taking advantage of the system & accumulating illicit wealth.

● Post-1991 marketisation phase,as economy expanded, a triad of corrupt

politicians, businessmen and the executive started reaping benefits. Many
politicians became businessmen – openly or by setting up proxies who at times
were their family members. Businessmen also entered politics in larger numbers.

● Privatisation and the establishment of the infrastructure of the private sector (in
public-private partnership mode) offered new opportunities for making illegal
gains by cornering resources like land, forests and mines.
 ● Indian Black Money Statistics
There are no conclusive reports on the amount of Black Money circulating in Indian economy, but
various estimates by agencies:

● According to a paper published by National Institute of Public Finance and Policy:

Rs 1.37 lakh crore worth of tax evasion--direct and indirect--has been
detected by Income Tax Department Estimation of Unaccounted GDP in India stood at

● India ranked fifth largest exporter of illicit money between 2002-2011, with a total of
$343.04 billion, and in 2011 it was placed third when $84.93 billion was sent abroad,
according to a 2013 report titled 'Illicit Financial Flows from Developing Countries:
2002-2011.

● According to Global Financial Integrity (GFI), a Washington-based think-tank, Indians

salted away $462 billion (about Rs. 28 lakh crore in current exchange rates) in
overseas tax havens between 1948-2008.

● $500 billion ( Rs. 31.4 lakh crore) and $1.4 trillion ( Rs. 86.8 lakh crore): Parked in
Years: 2014-2017
undisclosed overseas accounts, according to a BJP task force report of 2011
● The Income Tax Department detected undisclosed incomes totalling Rs 90,390 crore in IT
surveys and Rs 10,791 crore in search operations across the country in 2013-14, according
to a recent report.
 Major sources of Black Money generation:
• Evasion of taxation in various forms: taxpayers deliberately misrepresenting the true state of their affairs to the tax
authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than
the amounts actually earned, or overstating deductions.

• High level corruption: Use of powers by government officials for illegitimate private gain. An illegal act by an officeholder
constitutes political corruption only if the act is directly related to their official duties, is done under color of law or involves
trading in influence.

• Real estate transaction: In Real State transaction cases, property is purchased through anonymous shell companies or trusts
without undergoing proper due diligence by the professionals involved in the deal.

One of the most famous case is of Adarsh Housing Society which is a posh, 31-storey building constructed on prime real estate in Colaba,
Mumbai, for the welfare of war widows and personnel of India’s Ministry of Defence. Over a period of several years, politicians, bureaucrats
and military officers allegedly conspired to bend several rules concerning land ownership, zoning, floor space index and membership getting
themselves flats allotted in this cooperative society at below-market rates.
Other sources of Black Money generation:
• Gambling

• Undervaluation of Asset and Over Valuation of Liabilities

• Drug trafficking

• Weapons trading

• Selling pirated versions of copyrighted items such as software and musical

Recordings

HAWALA
● also known as Hundi

• an informal value transfer system-In India, Interpol estimates that the size of Hawala is possibly 40% of the country’s GDP

• based on the performance and honour of a huge network of money brokers.

• no promissory instrument
TAX HAVENS

A tax haven is a country that offers foreign people and businesses a

minimum tax liability.

● Offshore wealth held by Indians in tax havens has surged nearly 90%, since 2007
to $62.9 billion (about Rs 4 lakh crore) in 2015, 3.1% of the country's GDP in 2015,
the latest year for which data is available.

● Over 53% of this Indian wealth is now held closer home in Asian tax havens like :
Hong Kong, Macau, Singapore, Bahrain and Malaysia

● Swiss banks hold 31% of Indian wealth, down from around 58% in 2007.
Impacts of Black Money on Economy :

● Less tax for the government.

● Uncontrollable Inflation.

● Leads to Mass poverty.

● Impact GDP Growth

● Corruption leads to more corruption.

● Inflated Real Estate.

Other Impacts of Black Money on Economy :

● Transfer of Indian Funds Abroad to Safe Heavens.

● False Information about the Economy.

● Impact on Fiscal System.

● Create Inequalities.

● Implications for Monetary Policy.

Proposals to prevent Indian black money.

● Penalties and Prosecutions.

Penalty under Section 270A ( Penalty for Under reporting and misreporting income)

Penalty under section 271A (Default in maintaining or retaining books of accoont)

● Voluntary Disclosure of Income Scheme (VDIS).

● Modified Currency Notes.

● Tax Raids and Seizures.

Other Proposals to prevent Indian black money.
● Reducing disincentives against voluntary compliance.

● Supportive measures.

● Amnesty.
Demonetisation
“Demonetization is the withdrawal of a particular form of currency from
circulation.”

2016 Indian banknote demonetisation

● The Government of India declared on 8 th November 2016 that the five hundred
and one thousand rupee notes (Comprising 86% of whole cash currency)will no
longer be legal tender from midnight of that day.

● RBI issued Two thousand rupee notes & new notes of Five hundred rupees which
were placed in circulation from 10th November 2016.

● This measure was taken in an attempt to curb:

Black Money,

Corruption,

Fake currency in the economy

● This move was expected to cleanse the formal economic system and discard
black money from the same.
Was Demonetisation a Success ?

Pros of Demonetisation:

●Attack On Black Money Hoarders: 200% penalty on tax evaders caught embezzeling money in
accounts post Demo. 37,000 shell firms have been identified for strong action.tracking of
accounts via PAN no by IT department of GOI.

●Towards A Cashless Economy : The proportion of hard cash in the economy will decrease and
our economy will get more digitized .This will result in greater transparency.

●Transparency: Online transaction =More transparency-Financial Intelligence Unit will track all
online transactions. More Transparency in real estate sector.

●Death Knell To Fake Currency Rackets: Most of the fake currencies used to be in the
denominations of Rs. 500 and Rs. 1000 .
Cons of Demonetisation:

Short Term Inflation: Due to shortage of money in the market , a short-term

cost push inflation was forecasted.

Return of Notes to Banks: 98.96% of the high-value notes returned to the

banking system, and it would seem that illicit money did find its way back
into the system.

Shortage of Money to Common People: Long queues and temporary

shortage of cash was registered in initial months

Effects on Demand: The overall demand of products expected to be affected

to an extent. The demand in following areas impacted particularly:

● Consumer goods
● Real Estate and Property
● Gold and luxury goods
● Automobiles (only to a certain limit)
 CONCLUSION
● Black money and corruption affects us all.

● It weakens our democracy and trust in our leaders.

● It eats away at our ethics and corrodes our moral fibre.

● It discourages public and private investment and reduces its efficiency thus slowing

growth and development of our nation.

● But the people who suffer the consequences of black money most grievously are those

who depend upon public resources for their wellbeing.

● Now it is time for every Indian to stand erect to fight against the evil of black money born

out of corruption. We need to be aware,then create awareness & don’t give BRIBES &

must try to minimize cash based transactions.

SOURCES
● http://www.nipfp.org.in/publications/one-pagers/unaccounted-income-india-
methodological-development/

● http://www.gfintegrity.org/report/2013-global-report-illicit-financial-flows-from-
developing-countries-2002-2011/

● http://www.bjp.org/index.php?option=com_content&view=article&id=6567:executive-
summary-of-indian-black-money-abroad-in-secret-banks-and-tax-
havens&catid=68:press-releases&Itemid=494

● http://www.hindustantimes.com/india/india-s-black-money-stats-over-1-lakh-crore-
undisclosed-income/story-QXnFtDOGOtv28zeWMCfAeK.html

● http://www.u4.no/publications/hawala-remittance-system-and-money-laundering/

● https://timesofindia.indiatimes.com/business/india-business/indian-offshore-wealth-
parks-itself-in-tax-havens-of-asia/articleshow/60504767.cms
Now please ask questions to clear any doubts