Black Money, in common parlance, is that money which is not accounted for in the legal receipts and hence attracts no taxation. Any income which is obtained through illegal means and not declared for tax purposes is black money. They are usually received in cash from economic activity outside the purview of law and must be spent likewise or given semblance of legitimacy through laundering.
Any dealing that is done below the table, for which no authorized bills are drawn fall within the purview of black money. The common source of black money is through a parallel underground economy which deals in nefarious activities like dealing in pirated merchandise, illegal trading, prostitution, drug trafficking, weapons trading, terrorism or trading in counterfeit items.
Black Money is a dire threat to the fabric of a sound economy. The government has no control over such earnings and hence they have zero contribution in the development of a nation. The banking system also remains deprives of this illegally amassed wealth and hence cannot use it for furthering investment related purposes to fund big, medium and small time entrepreneurs. This unreported earning finds no mention in the GDP of a nation and is of no consequence in policy making and planning leading to a nation’s welfare.
Black money also manifests itself in many other malpractices,money laundering being the prime fallout. Any attempt toconvert illegally accrued black money into legal money, known as white money is known as money laundering. This is done through hawalatransaction in which money is transferred illegally from one region to another without using valid transaction network involving banks. Absence of any paperwork and confidentiality ensures the perpetrator remains undisclosed.
Black Money is triggered every time we go to a shop or a petrol pump or a convenience store and purchase goods or services without insisting on a valid sales tax receipt om the purchase. Use of unregistered cabs or availing services bypassing the authorized agent falls into the parlance of perpetrating black money market.
The impact of this illegally hoarded money is immense on the economy. An economy functions on the basic premise that a citizen would earn money, pay taxes to the government based on which the government shall make available certain basic services and infrastructural support for the growth of the nation. Black money puts a spanner on this, since the money which should rightfully enter the government coffers does not find its way and thus causes financial loss to the country’s economy. In a developing nation like India, where infrastructural growth is of such critical essence, this diversion of national fund is appalling. We rue about the state of our nation but the fact that the onus lies on us to a great extent, seems to be completely overlooked.
Black money does not only have financial implications but also causes threat to national security since it is frequently used to fund terrorist activities and underworld dealings. The Indian government in the recent years has cracked down on this malpractice heavily and with the introduction of GST and RERA, efforts are being made to induce transparency and fairness in the dealings. Linking of Aadhaar and PAN Card details in all financial transactions have been made mandatory and hopefully, the day is not far when this malpractice can be completely curbed.