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Black Money in India

Updated on 05 February 2021
6 min read 8 views
Updated on 05 February 2021

Black money has been a big issue in India for decades however the meaning of black money is still not clear among common folks. The reason behind this is in layman's terms, black money is money earned through illegal means. But in reality, it is more than that, now you must be wondering what is the real definition of black money? So it is clear that income generated through illegal means is known as black money but even the income which is earned through legal means and if not reported to tax authorities is also considered as black money.

Now the next question which comes to mind is how much black money is in India in 2020 because it is a serious menace present in society.

In India black money is the root cause of major problems such as poverty because it hampers money circulation and increases government deficit. So at present, there is 24.93 crore black money circulating in the Indian economy. Even after taking major steps by the government such as demonetization in 2016, the number remains to spike every year.

To rule out this menace from society it is important to know the sources as well as the causes of black money because only in this way we will be able to find solutions and take measures-

Sources of Black Money in India

The reason behind this huge number i.e. 24 crores is because many people are adding to this illegal wealth at the same time. Thus there are many sources of black money in India which makes the black money holders list longer and wider. We are listing some of the sources of black money below-

1. Money Laundering- This is the major platform to convert black money into white money. People who possess black money cannot use it in the open economy thus they use it by two sources- firstly they spend it in the underground economy. And Secondly- they take the help of money laundering where they mix the illegal money with legal money and move it back to the source.

2. Round Tripping- By this process, people send money to the tax-saving countries like Mauritius to save themselves from paying tax and then invest the same money in India as a foreign investment.

3. Sellers or merchants who do not give receipt or bill to the consumer saves the tax from the government thus this money is turned into black money.

4. Investment in jewelry or real- estate to hide the exact income from the government.

5. NGO’s and self-help groups hide the real number of donations from the government thus adding to black money.


Causes of Black Money

Black money is always a sin for society but to know why it is prevalent in society even after taking harsh measures, it is important to look at the possible causes of black money.

Scarcity- Black money is also caused by the scarcity of essential goods such as LPG gas, cement, sugar, oil, milk, cereals, etc. When the demand for these items exceeds the supply then it gives birth to illegal transactions and black money.

Inflation- People make a dual account for tax evasion and in this way, they do not have to give a huge share of their incomes to the government and can always have liquid money available.

Different Rates of Excise Duty- There is so much confusion about rates of excise duty because they are different for every item. For example- textiles and cigarettes have different excise duty and within textiles also there is a different rate for different cloth material which creates the scope of tax evasion.

Deficiency of Tax System- There are many laws related to income tax, sales tax, excise duties, etc but their enforcement is weak due to corruption in this department. High-income tax rates are also responsible for increasing black money.

Weak Implementation of Laws- The laws about black money remain on paper only and there is no proper enforcement of these laws. The other reason behind this is inefficient departmental people and lack of proper training.



Black money affects the financial system of the country and increases the scope of illegal activities such as drugs, terrorism, and narcotics. Black money in India is the root cause of major problems In India as it has a huge impact on the country's national income and widens the gap between rich and poor. But to rule out this widespread menace it is important to work at the individual level also by not promoting such things and taking actions at the individual level if you find someone involved in such activities.

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The Dowry System in India

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