The issue of black money has been a persistent challenge for India's economy and governance, affecting the country's financial system, development, and integrity. The existence and circulation of black money have significant implications for economic stability, social equity, and national security.

Definition and Understanding

1. Definition of Black Money

Black money refers to funds that are earned through any illegal activity, as well as legal income that is not reported to the tax authorities. These funds are not declared for tax purposes, hence they remain outside the formal economic system. Black money can take the form of cash, goods, or financial instruments and is often hidden from regulatory oversight.

Components of Black Money

i.Illegally Earned Money: Income generated from activities such as corruption, smuggling, drug trafficking, and other criminal enterprises.

ii.Unreported Income: Legal income that is not declared to tax authorities to evade taxation. This includes unreported business profits, rental income, and salaries.

iii.Underground Economy: Economic activities that occur outside the purview of government regulation and taxation, often referred to as the shadow or parallel economy.