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?

[UPSC Civil Services Exam – 2021 Prelims]

(a) Diversion of resources to the purchase of real estate and investment in luxury housing

(b) Investment in unproductive activities and purchase of precious stones, jewellery, gold, etc.

(c) Large donations of political parties and growth of regionalism

(d) Loss of revenue to the State Exchequer due to tax evasion

Answer: (d)        

Explanation:

• Black Money in India refers to money that is acquired through illegitimate means or income that is not reported for tax purposes.
• It encompasses funds earned through illegal activities as well as legal income that is intentionally hidden from authorities.
• The existence of black money has resulted in substantial revenue losses for the government due to the consistent evasion of both direct and indirect taxes.
• The generation of black income and the evasion of taxes are closely linked, and their combined impact undermines the principles of fairness and progressiveness in taxation.
• The presence of black money and tax evasion places a heavier burden on honest taxpayers, leading to economic inequality and the concentration of wealth in the hands of a dishonest few individuals in the country.