Black money refers to funds earned through illegal activities, such as tax evasion, corruption, and other criminal enterprises, which are not reported to the government and thus escape taxation. This illicit money circulates within the economy and contributes to a parallel economy that undermines the country's financial system. Black money has long been a challenge for India, affecting economic growth, social equity, and governance.

To tackle the pervasive issue of black money, the Government of India took a bold step by implementing a demonetization policy on November 8, 2016. Prime Minister Narendra Modi announced that the high-denomination currency notes of ₹500 and ₹1,000 would cease to be legal tender. This move aimed to eradicate black money, curb counterfeit currency, and promote digital transactions, thereby increasing the formalization of the economy.

Black money has distinct features that differentiate it from legally earned and declared income. Understanding these characteristics is crucial for identifying and addressing the issue of black money in the economy.

1.Non-Disclosure to Authorities: Black money is not reported to tax authorities or financial regulatory bodies, escaping all forms of legal scrutiny and taxation.

Individuals and businesses deliberately conceal their income and assets to evade taxes.

Transactions generating black money are often kept off the books, making it difficult for authorities to trace them.

2.Circulation Outside Formal Channels: Black money circulates outside the formal financial system, creating a parallel economy.