Which one of the following effects of creation of black money in India has been the main cause of wo

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?

Accepted Answer

Black Money - There is no official definition of black money in economic theory, with several different terms such as parallel economy, black money, black incomes, unaccounted economy, illegal economy and irregular economy all being used more or less synonymously. The simplest definition of black money could possibly be money that is hidden from tax authorities. That is, black money can come from two broad categories: illegal activity and legal but unreported activity. The first category is the more obvious of the two. Money that is earned through illegal activity is obviously not reported to the tax authorities, and so is black. The second category comprises income from legal activity that is not reported to the tax authorities. For example, let us assume that a piece of land is sold, with the payment made in the proportion of 60% by cheque or electronic transfer, and 40% in cash. If that 40% cash component is not reported to the Income Tax Department, then it is black money. A large number of small shops around the country almost exclusively do business in cash without receipts. All of this could potentially be black money. Another major source of black money is income earned by companies that is routed through shell companies abroad, thereby evading tax authorities. There are several ways to curb black money and the first is through legislative action. The government has already enacted several laws that seek to formalise the economy and make it necessary to report economic transactions. These include:  The Central Goods and Services Tax Act The various GST Acts at the State levels The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 The Benami Transactions (Prohibition) Amendment Act The Fugitive Economic Offenders Act  to name a few. Another method employed by the government to make it harder for transactions to be hidden is to mandate the reporting of PAN for transactions of more than ₹2.5 lakh, and the prohibition of cash receipts of ₹2 lakh or more and a penalty equal to the amount of such receipts if a person contravenes the provision. Statements given in option a, b, and c are ways of creation of black money. Option d is the effect of creation of black money.