BLACK MONEY : A MENACE FOR THE INDIAN SOCIETY

India is a corrupt country ranked at 69 out of 90 countries in the Corruption Perception Index by
Transparency International for the year 2000. Every political party collects funds and this is mostly in
the form of cash or black money. Black money is the oxygen for corruption and corruption is the
oxygen for black money. In India, black money will be able to run the national economy without any
foreign funds. It has been estimated that the black money economy is so large that it could wipe out
all the debts of the Govt. of India! This parallel economy is known as the black money economy. The
impact of black money economy is reflected in our day-to day life. Other than corruption, black
money is generated due to the following reasons:-

1) People do not pay their taxes. Even if they do pay taxes, it is not in the correct proportion to their
income. Basically, tax evasions by corporate houses run into billions of rupees. Corporate houses are
able to make use of the IT(Income Tax) rules and save taxes. Tax evasion leads to the generation of
black money.

2) Sale and Purchase of assets also leads to the generation of black money. This happens due to the
existence of procedures of over billing or under billing and exaggeration of expenses. The value of
the asset is shown to be very low in the documents whereas it has a very high value in the actual
transaction.

3) Businesses are conducted in other sectors of the economy in the same manner, whether it is at
wholesaler retail level, the non-billed amounts are retained by the individuals and firms as black
money. This black money is harming our national economy and emerging international markets.

One reason why we had achieved growth rate 4 to 5.5 per cent per annum whereas the economy
should have grown at the rate of 7 to 8 percent per annum is because of the flourishing black money
in our country.

Black money has led to an increase in the rich-poor divide. The poor are unable to make ends meet
but the rich on the other hand enjoy all the luxuries of life. The menace started during the 70’s and
is now at its peak and the common people have suffered due to rising prices and inflation.

The Government of India has taken concrete steps in order to curb the black money market. Those
individuals and firms who evade taxes and collect black money are being targeted. The government
has come up with policies to stop the expansion of black money. The Voluntary Disclosure of Income
Scheme(VDIS) was a big success. Nearly 4.5 lakh people declared their black incomes and the
Government earned around Rs.10,000 crores as a result of VDIS. VDIS was introduced in 1997.
Before 1997, there were other schemes such as Voluntary Disclosure Schemes(VDS) in 1951 and
Voluntary Disclosure of Income and Wealth Scheme in 1976, but were not as effective as the VDIS.

Simplification of rules and procedures is recommended so that the scope for black money is reduced.
There are specific success cases which can be replicated nation wide. For example, the Bangalore
Municipal Corporation came up with the self assessment of property tax. Perhaps every other city
can also follow the similar model so far as property assessment is concerned and thereby the scope
for corruption is reduced.
Black Money can be curbed only through the continuous efforts of the State and this is for the
betterment of the people. We should disclose our real incomes and must pay taxes regularly. Any
illegal means of making money should be avoided.

By
Tanmoy Bhadri (70001888)
HRO-CORP
HO