Black Money Generation in India - Methods


Black money generation in India primarily takes place through two sources. The first source includes those activities which are not permitted by the law, such as crime, drug trade, terrorism and corruption. The second is through a legally permissible activity but not accounted for and/or reported to public authorities which may result in tax evasion.
Tax evasion involves misreporting or non-reporting of the transactions in the books of account. The manipulation of financial statements results in the generation of unaccounted income that amounts to black money. Different kinds of manipulations of financial statements resulting in tax evasion and the generation of black money.
Manipulation of Financial Statements can take place through two different methods:
Out of Book Transactions: One of the most widely adopted methods of tax evasion, generally prevalent among the small shops, unskilled or semi-skilled service providers, etc. Transactions that may result in taxation of receipts or income are not entered in the books of account by the taxpayer who either does not maintain books of account or maintains two sets or records partial receipts only. This method is a likely source of generation of black money across Real Estate, Hotels, Consumer Markets, Retailers, Betting, etc.
Manipulation of Books of Account: In case of mandatory requirement to maintain books of accounts by taxpayers under different laws, manipulation of the books of accounts such as suppression or inflation of sales/receipts, manipulation of expenditure, capital, etc, is done to evade taxes. This method is a likely source of generation of black money across Real Estate, Hotels, Retailers and Consumer Markets.
Key sectors Impacted
About a third of India’s black money transactions are believed to be in Real Estate, followed by Manufacturing, and purchase of Jewellery and Consumer Goods.

Friday, 02nd Oct 2015, 10:54:44 AM

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