Abstract
Corruption in the Indian society has prevailed from time immemorial in one form or
the other. The basic inception of corruption started with our opportunistic leaders who
have already done greater damage to our nation. .Corruption in India is a result of the
connection between bureaucrats, politicians and criminals. Earlier, bribes were paid
for getting wrong things , but now bribe
is paid for getting right things done at
right time.Growing corruption In India
as a Black money refers to funds earned
on the black market, on which income
and other taxes have not been paid.The
total amount of black money deposited
in foreign banks by Indians is unknown.Some reports claim Funds deposited by
Indian nationals and firms in Swiss banks rose to a 14-year-high of 3.83 billion Swiss
francs (over Rs 30,500 crore) in 2021.
Introduction
In today's scenario, if a person wants a government job, admission in respective
colleges he has to pay lakhs of rupees to the higher officials irrespective of satisfying
all the eligibility criteria.Tax evasion is one of the most popular forms of corruption.
It is mostly practiced by Government officials and politicians who lead to the
accumulation of black money which in turn spoils the moral of the people. According
to the Standing Committee's report, the sectors that see the highest incidence of black
money include real estate, mining, pharmaceuticals, pan masala, the gutkha and
tobacco industry, bullion and commodity markets, the film industry, and educational
institutes and professionals.
Objective of Study
In India there are lots of government sectors which are involved in corruptive
activities. Even In colonial India, numerous committees and efforts were Initiated to
identify and stop underground economy and black money with the goal of increasing
the tax collection by the British Crown government.It suggested major amendments to
protect and encourage the honest taxpayer and effectively deal with fraudulent
evasion.
The objectives of the studies are:
To analyse the different sources of generating black money which are indicating
the downward of Indian Economy as well as the society.
Measures to control black money.
Sources of Black Money in India
Sellers or traders who do not give bills or receipt creates black money.
Many people invest in bullion or jewellery to hide their actual income from the
authorities.
In the real estate sector, many people undervalue their real assets to refrain from
paying the rightful tax. They cheat the government of the correct amount of
property tax.
Some Self-Help Groups (SHGs) and trusts do not provide proper sources for their
funds and donations received.
Tax havens: Tax havens are generally small countries where foreigners don’t
have to pay taxes. These countries generally have very liberal regulatory
frameworks, which big corporations take advantage of. They set up shell
companies there and redirect all their profits to this entity, by which they can
reduce their tax liabilities by a huge margin.
Hawala: Hawala is an informal method by which money can change hands
without the use of banks. This works through codes, contacts and trust with no
paperwork at all.
Investments through innovative derivative instruments like participatory notes
also is a means to hide black money.
Money Laundering
Money laundering is the process by
which black money is converted into
white money.People who possess black
money cannot spend it publicly. They
should either hide it or spend it on the
underground economy. Through money
laundering, they convert it into white
money. It is a method by which
criminals mask their accumulated wealth.
Through money laundering, people
separate the money earned (illegally)
from its source, mix it with white money,
and then funnel it back into the source.
Another commonly heard related term is
round-tripping. Here, people send money to a tax haven like Mauritius or Cayman
Islands (to avoid paying tax) and then invest that money into India, thus becoming a
foreign investment.
Effects of Black Money in India
It affects the financial system of the country. The central bank is not able to
control money supply in the economy causing higher inflation. This will lead to a
fall in the value of the currency.
Black money affects the credibility of a country negatively.
Black money is most often used for illegal activities such as drugs and narcotics
dealing, terrorism, etc. which is detrimental to the heath of the country.
The government suffers a big loss in the form of taxes because of black money.
Black money creates a parallel economy in the country, which is completely
underground. For example, in Mexico, there is a thriving parallel economy
because of the illegal trafficking of drugs. This leads to governance problems.
Black money can also cause real estate prices to go up, which may lead to an
asset bubble.
Black Money in Swiss Banks
Funds parked by Indian individuals and firms in Swiss banks, including through
India-based branches and other financial institutions, jumped to a 14-year-high of
3.83 billion Swiss francs (over ₹30,500 crore) in 2021 on a sharp surge in holdings
via securities and similar instruments while customer deposits rose as well, annual
data from Switzerland's central bank .
This is the second consecutive year that the funds deposited by Indian clients in Swiss
banks have increased.
In 2020, a total of 2.55 billion Swiss francs (over ₹20,700 crore) were reported in the
Indian accounts, an increase of 183% from the 899 million Swiss francs (₹6,625 crore)
in 2019.
The deposits stood at a record high of 6.5 billion Swiss francs (over ₹52,500 crore) in
2006. The data is a collection of official
figures reported to the central bank by various
individual banks in the country.
However, it does not account for the alleged
black money held by Indians in Switzerland. It
also does not include the money that Indians
might have in Swiss banks in the names of
third-country entities.
A notion of secrecy has always been
associated with the banks in Switzerland,
making them popular among people.
Following pressure from several countries,
Switzerland began sharing information about
people holding accounts in their banks with
other countries from 2018 onwards. The information includes the owner’s name,
address, country of residence and tax identification number as well as the reporting
institution, account balance and capital income.In 2019, Swiss tax authorities shared
with India the first tranche of details about the financial accounts of Indian clients in
Swiss banks under the automatic information exchange framework between the two
countries. However, the finance ministry has not made the details public, saying such
disclosures are prohibited under “confidentiality provisions” of a tax treaty between
India and Switzerland.
Measures were taken by the Government to Curb
Black Money
Tax reforms have been initiated with a view to resisting black money. The tax
base has been increased and rates have been slashed. Reforms are being made to
incorporate tax deduction at the source itself.
Through the Black Money Bill, the government has allowed the reporting of
black money generated through tax evasion in a given time frame.
Demonetization of Rs.500 and Rs.1000 was carried out in 2016 with the primary
view of making black money useless.
The government is encouraging cashless/digital transactions with a view to
making things more transparent.
Electoral reforms are also intended to curb black money as much of the black
money generated in India is used in elections.
Legislative Framework to deal with Black Money
Prevention of Corruption Act, 1988
Benami Transactions Prohibition Act, 1988
Prevention of Money Laundering Act, 2002
The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015
Lokpal and Lokayukta Act
Conclusion
Political corruption is worst in India. After 5 years of demonetisation, black money is
very much around.The Narendra Modi government expected demonetisation to
extinguish at least Rs 3-4 lakh crore of black money. According to RBI data, almost
the entire chunk of money (more than 99 percent) that was invalidated came back into
the banking system.
Black money, especially that which is stashed abroad, is like a ghost. Its existence
spooks everyone even if they are not sure about the shape and form. All governments
in the past and present seem to have shadow-boxed with this ghost without much
success. To tackle the problem, Finance Minister has announced one new provision
'Deterrence against tax evasion' in Union Budget 2022- 23 to curb black money.
Sitharaman said, "Presently, there is ambiguity regarding set off, of brought forward
loss against undisclosed income detected in search operations".Announcing the
introduction of the digital rupee as the official pointed out that black money proceeds
are usually received in cash from underground economic activity and, as such, are not
taxed, but if RBI has the transaction trail of every digital rupee then it will be difficult
for a person to evade taxes and Digital currency will also lead to a more efficient and
cheaper currency management system.
References
https://www.tnpscthervupettagam.com/articles-detail/black-money-and-india
https://www.newindianexpress.com/opinions/editorials/2022/jun/21/grappling-
withthe-menace-ofblack-money-2467902.html
https://en.wikipedia.org/wiki/Indian_black_money
https://thefederal.com/business/indian-deposits-in-swiss-banks-rise-to-14-year-high-
of-%e2%82%b930500-crore-in-2021/
Questions
1. Are offshore industry experts outsmarting Indian investigators?
2. Do you think digital rupee will help in curbing black money, corruption &
terrorism?
3. Overall, what do you think about the Government's moves to tackle black money?
