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Black money is referred to the fund which is hoarded by dishonest means and is not declared to the relevant taxation authorities in order to avoid payment of taxes. Black money is created in India in different ways. It is also generated from legal transactions as well.

It is difficult in converting black money into white money by tax avoidance. A few ways to convert black money into white without opting for tax payment are listed below.

1) Disclosing fictitious sales in the Financial Statements – Many business houses show fictitious sales in the books of accounts. Therefore, the earning from illegitimate sources gets converted to white and they become part of taxable income.

2) Sale of valuable jewelry A person gives a certain amount of cash to a Jewelry shop. The latter issues a  receipt as a proof of buying jewelry worth that amount and makes the payment by cheque. The jeweler charges some fee to facilitate such transaction. Thus, black money turns white without paying any income tax.

3) Agricultural income Agricultural Income is exempted from Income Tax in India. People possessing black money will generate fake vouchers to prove the sales of agricultural goods. They can also generate fake documents showing acquisition or inheritance of properties in villages.

4) Gifts from relatives and friends Money which is received from relatives as a gift are exempted from Income Tax. People having huge stock black money in hand can disclose them as a gift received and avoid payment of tax.

Generation of black money is a huge threat to the Indian economy. The parallel economy disturbs the balance of trade, commerce, and industry of India. Black money is getting generated on a continuous basis in our economy. It is highly probable that black money can affect the economic planning and policy formations of India to a huge extent unless some strict measure is adopted to crush the same.





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