1. What is Black Money?

Black money refers to income that has not been declared to the tax authorities and on which taxes have not been paid. It is also called “unaccounted money” or “parallel economy.”

• Generated through: Tax evasion, corruption, illegal activities, hawala transactions
• Stored as: Cash, gold, real estate, foreign bank accounts
• Estimated size: 20-25% of India’s GDP (various estimates)

2. Demonetisation (November 8, 2016)

PM Modi announced the demonetisation of ₹500 and ₹1,000 notes on November 8, 2016. These notes ceased to be legal tender from midnight.

• Objectives: Eliminate black money, curb counterfeit currency, promote digital payments, bring informal economy into formal system
• Impact: Short-term disruption to economy; GDP growth slowed; digital payments increased significantly
• Controversy: Most demonetised currency returned to banks — critics argued it didn’t eliminate black money

3. Measures Against Black Money

• Pradhan Mantri Garib Kalyan Yojana (PMGKY): Scheme to declare undisclosed income and pay tax + penalty
• Benami Transactions (Prohibition) Act, 1988 (amended 2016): Prohibits benami transactions (property held in another’s name)
• Black Money Act, 2015: Targets undisclosed foreign income and assets
• FATF (Financial Action Task Force): India is a member; works to combat money laundering
• PMLA (Prevention of Money Laundering Act, 2002): Criminalises money laundering

4. Tax Reforms

• GAAR (General Anti-Avoidance Rules): Allows tax authorities to deny tax benefits if the main purpose of a transaction is tax avoidance
• Faceless Assessment: Income tax assessments done online without face-to-face interaction — reduces corruption
• Taxpayers’ Charter: Defines rights and obligations of taxpayers
• GST (2017): Brought many informal businesses into the tax net
• Direct Tax Code (DTC): Proposed to replace Income Tax Act 1961 with a simpler code

5. Key Points for Exam