Question

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?

1. Diversion, of resources to the purchase of real estate and investment in luxury housing
2. Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc
3. Large donations to political parties and growth of regionalism
4. Loss of revenue to the state Exchequer due to tax evasion

Answer 1

Correct Answer - Option 4 : Loss of revenue to the state Exchequer due to tax evasion

The correct answer is Loss of revenue to the state Exchequer due to tax evasion.

• 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. 
• 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.