October 25, 2017

Essays for IBPS PO VII in 250 Words : Impact of unearthing of black money on the Indian economy

Wednesday, October 25, 2017 Essays for Competitive Exams 1 comment

Impact of unearthing of black money on the Indian economy

Black money refers to any income earned through illegal means on which income and other taxes have not been paid to the government. In other words, it is an individual's holdings, acquired illegitimately through gambling, trafficked dealings, hoardings, forging income statements, etc.

Black money is usually not legitimate and it is therefore not disclosed. In India, the concept of black money is not new. The practice of giving and taking of bribes to get work done easily and quickly is perhaps the root cause from where the concept of illegal money originated. This illegal form of money is received by corrupt politicians, bureaucrats and other administrative bodies at different levels. As this is an illegal form of money, the recipient cannot disclose this income but it is still an income that circulates in the economy through various channels.

A large part of the black money is usually invested in the building and construction industry; gems and jewellery industry; and the film and entertainment industry. Apart from this, it has emerged from media reports that a significant amount of black money is used to fund the election campaigns of different political parties.

There are various reasons that are responsible for the accumulation of black money. The Illegal act of receiving a bribe, non-disclosure of income to the Income Tax authorities, and undisclosed sources of income by various service providers, such as lawyers, consultants, doctors, etc. are major reasons for black money accumulation.

It has been seen that the declaration of the source of income is the basic reason for not paying Income Tax. Therefore, the Income Tax Act, 1961 forces an assesse to disclose the source of income apart from the amount of income.

Unearthing the black money is a necessity for the Indian government to discourage people from tax evasion. Various measures have been initiated from time to time to curb black money. For example, Voluntary Disclosure of Income Scheme (VDIS) was introduced in 1997 to encourage the disclosure of sources of income. Under the scheme, the government assured no investigation for the sources of income disclosed. Various tax raids have also been conducted at intervals to seize illegal assets and money. However, it is not an easy task to completely eradicate black money and requires more drastic measures on the part of Indian government to initiate Tax reforms.