Black Money in India
Where Black Money Comes From
How under-reporting of sales, inflated expenses, bribes and political funding generate black money, and why cash-heavy sectors are most affected.
Black money has many sources.
Business
- Under-reporting sales.
- Inflating expenses.
- Fake invoices.
Corruption
Bribes to officials.
Political funding
Cash donations to parties, historically hard to trace.
Cash-heavy sectors
- Real estate.
- Jewellery.
- Education (capitation fees).
- Weddings.
Why people evade
- High tax rates in the past.
- Low chance of being caught.
- Complex rules.
Economics
Evasion rises when benefits exceed expected penalties.
The capitation fee
A private college demands an unrecorded cash payment for a seat, generating black money.
Thinking only big businesses create black money
Many small transactions do too.
Key takeaways
- Under-reporting and fake invoices create it.
- Bribes and cash donations add to it.
- Real estate and jewellery are cash-heavy.
- Low detection encourages evasion.
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