Black Money: Complete Analysis

Author: Ms. Anubhuti Agrawal, JLU School of Law, Bhopal


As we know that in Ancient times our country, INDIA, was popularly known as „Golden Bird‟ because people of our country were more civilized in terms of coordination and co-operation, worked in a very enthusiastic & honest manner so as to provide fruits of their work to everyone without any selfishness and/or jealousy i.e. they were not concerned about their earnings as compared to others. They focused on the welfare of the nation as a whole. So it could be predicted at that time that our country will become one of the greatest economies in the world and be at the top as regards developed countries very soon, but sadly it didn’t happen.

There are many reasons behind it but the basic reason is the “Use of BLACK MONEY” to a large extent in our country. In Ancient times the ways to generate money, as well as its usage, was very transparent i.e. everyone knew the sources of money and its application, which may be referred to as WHITE MONEY. So, in the past, White Money was in use but now the colour of Indian money has changed to Black.

What is Black Money?

 As we know that in the present times, black money is used in our country up to a large extent so it is not possible for us to define it in very clear terms. Different people define it in a different way with different terms such as unaccounted income, black income, black wealth, underground wealth, or at the economy level it is known as the black economy, parallel economy, shadow economy, and unofficial economy. Therefore, all in all, these terms usually refer to an income on which the taxes are imposed by the government but have not been paid.

Black Money refers to that money that is not the fully legitimate property of the owner. It is normally received in terms of cash from economic activities. i.e. Individuals who received it must hide it, spend it on for the fulfillment of their needs.

 According to the National Institute of Public Finance and Policy (NIPFP) defines-

“Black Money is the aggregate of incomes which are taxable but not reported to authorities.” Apart from this, the term black money would also include legal income that is concealed or hide from public authorities: 

  • To evade payment of taxes which  includes – income tax, excise duty, sales tax, stamp duty, etc ;
  • To evade payment of other governmental or statutory contributions;
  • To evade compliance with the provisions of various industrial laws which exists such as the Industrial Dispute Act 1947, Minimum Wages Act 1948, Payment of Bonus Act 1965, Factories Act 1948;
  • To evade compliance with other laws and administrative procedures applicable in India.

From where is it generated? It is generated through the main two activities or means – Illegal means and Legal means

It is earned through illegal means such as drug trafficking, weapons trading, terrorism, selling counterfeit or stolen goods, etc.  By Corruption which includes bribe given to and by public officers. Hiding income through Legal activities i.e. not reported to public authorities or we say to the govt. for the purpose to evade taxes. Even commercial classes generate black money through Trade.


As we know, in recent times the issue of black money and corruption has come into being with the participation of our civil society and parliament institutions. In this context, two main issues have come into being-

Firstly, without an adequate factual basis, a large magnitude /amount of black money and unaccounted wealth stashed abroad every year. 

Secondly, the Govt. Response to address this issue has been inadequate or we say considerably negligible.

Now let us look at the picture of Black Money in India

Almost every sector in our country generates and uses black money for its survival in the market, society….etc. It includes Real estate, financial market, bullion & jewelry market, non-profit organizations, external trade and so on.

Apart from this, in India black money persists due to the existence of Demonstration Effect i.e. the way to live a life in terms of others’ points of view or we say live life by looking at others’ livelihoods. People of India are very much affected by the lifestyles of other people of the society who are maintaining considerable high status, and in turn, want to be like them. For this, they want to generate money by any means. Therefore to fulfill these desires or to maintain their status in society they force themselves to generate and use black money.

Another reason for the existence of black money is the presence of Corruption in every field of the economy. For example,

1. if any common man wants to get a job in any public institution like in a bank, or any transport or educational institution, etc., then he will have to pay adequate consideration to the authority of that respective institution i.e. Bribe have to be paid. For this, the common man is forced to generate money by illegal means. In this way, we can say that both, the public authority and a common man generate and use black money in a considerable manner.

2. Likewise, if a student wants to get admission to any big and reputed institution, he will have to pay some extra money other than fees in the form of Donations, etc.

3. Also in some Educational institutions, more fees are charged for examination forms or for practicals which is considerably higher than the quoted fees. In this way, black money is generated and used in big and reputed educational institutions.

Another aspect of black money is very astonishing for society from which a significant amount of black money is generated and used and that is the spirituality.

Look at the cases of NIRMAL BABA and RADHE MAA:

If anyone wants to meet Nirmal Baba personally then he shall have to pay such heavy amount which may be out of one‟s pocket. Similarly, to listen to his teachings in “Nirmal Darbar”, one has to pay a minimum amount of around Rs. 2000/- per seat at the back rows, which increases as we move towards the front rows of the auditorium, with a validity of a day only. Also, his bank accounts are being credited regularly by many hidden donors. In this way, this one person is earning a lot of money by fooling innocent people by camouflaging himself as a spiritual leader and uses such money for unofficial purposes, hence, generating a lot of black money.

Radhe Maa, who calls herself as an avatar of Maa Durga, wears heavy jewelry and bridal dress and heavy makeup. Her jewelry and bridal dress are never repeatedly worn. This shows her earnings which are officially concealed i.e. it is all Black Money.

In India, people are very emotional towards spiritualty and many such „BABAs‟ & „MAAs‟ make misuse of their emotions and sentiments and referring themselves as spiritual leaders generate a significant amount of black money.

Effects Of Black Money

It leads to an increase in inequalities of income which widens the gap between the rich and the poor people of our country. 

It leads to wasteful consumption in our economy i.e. money which should be used for investment but wasted at consumption. 

It leads to a decrease in the working efficiency of people as they get used to earning Black money by easy means and they start preferring leisure to work.


Above we have studied a comprehensive analysis of factors leading to the generation of black money in our country. At the same time, it is not possible to curb, control and finally prevent the generation of black money in the near future as well as repatriation of black money. It is possible only if a comprehensive mix of well-defined strategies and policies is pursued with patience and perseverance by the central and state government and put into practice in a very coordinated manner. There are some challenges that might be faced by the government as explained below.

To control criminal activities

 As we know, in a country like India there are many illegal activities and crimes that lead to the generation of a significant amount of black money incomes. It includes counter fiat currency, drug trafficking, etc. Each of them is a major source of unaccounted or black money. So to control them is one of the greatest challenges before society as well as for the govt… Therefore, it requires all agencies of both central and state government to actively make strategies to bring them to a halt.

Repatriation of black money stashed abroad:-

I think it is one of the biggest challenge of our government of India to bring back money from abroad. However; it is a goal that cannot be achieved by government action alone as it requires coordination and co-operation of other countries as well as authorities to achieve this. So, the government needs to evolve an environment & create a legal mechanism through global consensus, co-ordination & by making specific bilateral treaties.

Special Investigation Teams:

In order to control and curb the prevalence of black money in India, govt. has makes a team which is known as Special Investigation Teams to investigate on the issue of black money. So, at present in India, it works under the chairmanship of retired SC Judge B. P. Jeevan Reddy. But its success depends upon the team members of the committee as it requires a significant effort to work on this issue. So, the government must take quick action in setting SITs, then potential black money holders will definitely reduce. It is a big challenge in front of the government to properly implement the special SIT which helps to bring back stashed black money in the country.

Less formation of Committees:

I think this is one of the biggest challenges which are going to be faced by the Indian govt. to form fewer committees. i.e. Ministers in Indian Political System are just focus on setting up new committees even for a very small issue in order to rot the issues i.e. our politicians only know how to delay the process of action and thereafter, making lame excuses rather than providing solutions for a problem i.e. Corruption and black money. So, we can say that the Indian Government is just forming committees to make fool of the people of India and not for the sake of the nation. So, it‟s a very big challenge for our Government to properly form committees and run them in a very efficient & effective manner.

Reduction in the Cost of Compliance and Administration:

As we know that the transaction cost associated with compliance and Administration is one of the major disincentives for the generation of black money in a very large amount. It includes the cost of compliance, administration, maintenance of books of accounts, etc. which is being borne by the citizens of our country, or we say taxpayers who are in turn compelled to evade taxes. In this way, black money is being generated in our country. Therefore it must be reduced which again proves to be a challenge for the Government of our economy.

To control corruption:

As all know that there is only one major reason behind the generation of black money is – corruption. It is perceived as one of the biggest challenges faced by our country which is almost impossible to counter. As we study above all the factor that leads to the generation of black money are directly related to corruption. So to control black money .it is essential to curb and control corruption which requires multipronged strategies with assigned the responsibility to prevent it. For this, the government has introduced the Public Procurement Bill 2012 which intends to regulate public procurement by all Ministries and Central Government Departments. This bill aims to ensure transparency, the fair and equitable treatment of bidders, promoting competition, and enhancing efficiency and economy in the public procurement process. Therefore, at last, I want to say that if govt. really wants to control corruption, then there should be proper implementation of Public Procurement Bill 2012.

To Strengthen Social Values:

I think to control the generation of black money in our economy requires a combined effort by all citizens of a country. Or it needs to be fought by every citizen at various levels which includes political, economic and administrative levels, etc. At the ethical level, we have to reinforce our moral education in the school curriculum particularly highlighting the ills of black money which in turn leads to tax evasion. At an economic level, there must be a reduction in wasteful consumption or expenditure, and to encourage savings, frugality, and simplicity which in turn reduces the gap between the rich and the poor. So, to strengthen the value system of our country at the individual level is proving to be a challenge for an economy.


After studying the concept of black money & its various sources of generation in our country, it‟s time for some Recommendations & Suggestions that may help to control black money in India. These are as follows: 

Our Government should make its foremost objective to control black money in our country.

E-Governance should be started by the Government i.e. the use of technology be made as far as possible like registration with Revenue Authorities, E-Filing of Returns, etc. because more the involvement of human beings, more is involvement of corruption, ultimately generating Black Money.

Black money revolves around cash only so the Government should put a restriction on cash transactions wherever possible and instead should increase the use of Plastic Money like Debit Cards, Credit Cards, etc. and by other such means. 

Agriculture income should be taxed for those who have both the agricultural as well as non-agricultural income. 

The Government should not give absolute power of work to anyone person as it creates a monopoly and instead should segregate the work among many persons.

 All the aspects of its generation should be looked into and stopped. 

Competitive bids should be motivated.


This article presents the different aspects of black money and its relationship with policy and administrative measures in our country. It also reflects the policy and strategies that the Government has been pursuing in the context of recent initiatives, or need to take up in the near future, in order to address the issue of black money and corruption in public life.

There is no doubt that the existence of black money has a significant impact on social, economic and political levels of our lives which has a significant effect on the institutions of governance and conduct of public policy in the country.

So we can’t say that India is a poor nation. In fact, India is amongst the Richest Nations if Stashed Black Money is brought back & converted to White Money and a fresh generation of Black Money is put to an end