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Meaning of Black Money

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As the name suggests, the meaning of black money implies all forms of money that are acquired or earned through illegitimate means. It also includes money that is concealed or unaccounted from tax authorities or government regulations and hence no tax is paid to the government for possessing them. Even cash transactions in which there is no proper accounting fall under the definition of Black Money. This type of money is hidden from government authorities and they do not reflect in the national income, Gross Domestic Product (GDP) or other economic measuring parameters of a country.

The use of Black Money is mostly by people who have their sources of income through dubious means. In many instances, it is also used to fund and carry out illegal activities like terrorism, narcotics trade, trafficking, smuggling, sexual offences, etc. However, in India, many sectors generate and use black money for survival in the market like bullion and jewellery, non-profit organisations, the financial market, real estate, external trade, etc. The volume of black money generated and used by these sectors may not be much but many large corporations produce huge amounts of black money and they are mostly deposited in safe tax havens abroad through different methods like Hawala, round-tripping, etc.

However, with increased awareness and genuine requirements, the government felt the need for measures to control black money and introduced suitable legislation for the same. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, is a step towards eradicating the menace as it is an Act duly passed by the Parliament of India. It aims to check undisclosed foreign assets or black money by imposing penalties and taxes on such amounts. Through this legislation, Indian residents can declare their undisclosed assets held abroad so that the government can bring them back to India.

With this Act, people can also report black money within a time frame and an amendment was also made to the Act in 2019 retrospectively to include those citizens who are non-residents but were residents when the income or asset was acquired outside India. India also has other legislations to tackle the problem of black money like the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, Benami Transactions Prohibition Act, 1988, Lokpal and Lokayukta Act, etc.

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