These days we are worrying about the effects of black money on our economy. What is black money? The definition of black money is that income on which the earner has not paid income tax. Two questions come up for discussion here. Why they do not disclose their true income? Why people do not pay income tax? 

People often ask these queries when the subject of black money comes up for discussion. Prime cause for avoiding the tax is high level of taxation. This answer we get for the matter for argument. I discovered other more tangible reason for creation of black money. This time I want to share that with my readers here. That more important reason for avoiding the income discloser is the inquiry of the income tax department into the details of how the income accrues. 

A large many people have other sources of income, that is often black money income and that they cannot explain in the tax return form of the income tax department. Since the source of income is not legitimate, they are afraid of being exposed and to avoid that, they prefer to keep the details undisclosed to income tax department. Even though, they have no objection to pay the ensuing income tax. As a result, the black money develops. The chain of further development of more black money continues for the same reason, that the income being undisclosable for being illegitimate. This goes on adding to the black money. This is so because when that B. money used to do any business the income on that becomes another phase of B. money. 

I talked with many advocates and Doctors who make large some of black money every day. They told me that they have no problem in paying the tax that may be applicable for that income but giving explanation for all the events through which that income comes is not possible. That is the reason why they prefer to avoid declaration of the details and in return create more black money. Similarly, politicians earn a lot of B. money they cannot declare in the set form but they do not mind paying tax. Amongst other are Advocates, government officers, income tax officers, sales tax officers, police officers etc. 

Other people such as municipal servants, government employees and many more who have access for that type of undisclosed income gave similar reason for not paying the income tax; as they cannot tell in the income tax returns that they made money by illegal means. This is so because, the law says that all income for taxation shall be only legitimate. Whereas some income tax officers suggested that tax payer can pay tax by showing some seemingly tangible source but that is not always possible. At the same time, other some, object to such declarations and say, they shall take action on such disclosures. That means law forbids the earner from paying income tax on all his illegitimate income. At the same time, law does not say that taxpayer cannot earn money by undisclosable means. This is the shortcoming on the income tax act according to me. We should think of amending Income-tax act to facilitate such payments. 

If we have a simple form for filing income tax returns in which there shall be no inquiry about how the money came to the taxpayer. Only to declare that he has earned that amount during that period without any details at all. Just a form of two lines will do. They say they will pay income tax on the income and the problem of black money gets resolved without much hassles. This shall improve revenue appreciably. 

Today our income tax department is doing dual job of detecting illegitimate sources and also collecting tax. Some experts agreed to me and added that the work of detecting illegitimate income kept separate from the income tax department. Other crime detecting intelligent agency will do that work if the situation demands and not otherwise. Today our tax arrangement is suitable and on the whole, taxpayers are reasonably satisfied with it. One B. money holder told me, income tax department should keep their income amount confidential and any detective agency appointed to disclose illegitimate sources of money left to fend for itself without any inputs or assistance from income tax department. He assured that if such protection given, no body shall keep any money in countries outside India. 

I am not a tax expert however; I feel if our finance department accepts this suggestion, we will have no black money and that will avoid all the troubles due to black money. As for the reasonableness of any income by undisclosable means the discussion and investigation can go on but it should not interfere in the process of collecting income tax. The argument should be that, since the citizen has earned it, he/she should pay tax as per the levels, illegitimacy or otherwise. Income source should not be the concern of the income tax department. Bottom line is that, the root cause for all the problem of black money is our impractical income tax law. 

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Ashok Kothare’s Blog 

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