Q. Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
- Diversion of resources to the purchase of real estate and investment in luxury housing
- Investment in unproductive activities and purchase of precious stones, jewellery, gold etc.
- Large donations to political parties and growth of regionalism
- Loss of revenue to the State Exchequer due to tax evasion
Answer: d) Loss of revenue to the State Exchequer due to tax evasion
Notes:
- Black Money in India, is a term used to describe money that is illegitimately owned.
- Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes.
- The generation of black income has been resulting in a huge loss of revenue to the state exchequer due to continuous evasion of taxes both from direct and indirect taxes.
- In addition, these funds rarely enter the banking system. As a result, it can be more difficult for legitimate small businesses and entrepreneurs to obtain loans.
- Black money and tax evasion which go hand in hand, have also the effect of seriously undermining the equity concept of taxation and warping its progressiveness.
- Together, they throw a greater burden on the honest taxpayer and lead to economic inequality and concentration of wealth in the hands of the unscrupulous few in the country.