BLACK MONEY

BLACK MONEY

Black money is concealed income which has evaded taxation. According to Wanchoo Committee it denotes not only unaccounted currency which is either hoarded or in circulation out side disclosed trading channels, but also its investment in gold, jewellery,
and even precious stones made secretly, and land and buildings and business assets over and above the amount shown in the books. It is a threat to national economy as it finaces smuggling and other illegal business activities.

Magnitude: According to the majority report of the committee it amounted to Rs. 1400 corers in 1968-69. but according to Dr. Rangnekar, a dissenting member, it came to Rs.2833 corers it is growing at the rate of 12% per annum as against 11% of the legitimate national income in terms of money value.

Loss of Rs.1000 corers every year by way of tax revenues.

Total value of transactions financed by black money reaches the staggering figure of 1400 corers according to Dr. Rangnekar, i.e. about half the total volume of transactions in the nonagricultural sector.

How created: Concealment of income by big business, professional people like doctors, contractors and other self-employed persons. Also by entrepreneurs wishing to buy an import licence in black market or to plough back more money into their enterprises without paying taxes.

How it runs parallel economy: Used for buying smuggled or scare materials in black market, for buying import licences, for bribing the various government officials connected with factories, constructing luxury apartments and thus playing havoc with the national economy. It circulates inside the parallel economy in a closed circle. The possessor of black money may sell an import licence at a premium and loan out the amount at high rate of interest to finance smuggling or purchased lf scarce materials in black market. The recipient likewise has to dispose of his black money in another clandestine transaction. And so it goes on.

How spent: used to buy gold, jewellery, real estate spent on luxury living and above all, in financing the parallel economy.

Ways to bring it into the legitimate market and check further growth: As recommended by Wanchoo Committee rate of taxation should be lowered particularly on the highest slabs of income, number of economic controls should be reduced.

Step taken by the Government: The Government is empowered to acquire at recorded price any property suspected of having been grossly undervalued to escape wealth tax, capital gains etc. Indian Registration Act being modified to ensure compulsory registration of any deal pertaining to flats in a building owned by a cooperative housing society.
The owner of a property in ‘benami’ name will not be able to enforce his claim in a court of law unless the income from the property has been declared tax authorities.

More steps needed: Savings and investments upto a certain limit be exempted from taxation. The loss in revenue will be more than made up by increase in savings.

Current be demonetized so that the parallel economy is disrupted. In the meantime other measures to check the growth of black money be taken.

Black money has created a vicious circle in which every increase in taxation is followed by further tax evasion and this again compels the Government to go in for higher tax rate. This circle has to be broken. Black money is a cancerous growth; says Wancloo Committee, which if not checked will surely lead to the economy’s ruination; we must act while there is time………………………..