Question
Q9. Which of the following effects of creation of black money in India has been the main cause of worry to be Government of India?
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 Donation to political parties and growth of regionalism
D. Loss of revenue to the state Exchequer due to tax evasion
Answer: D
Detailed Explanation
• Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. Black money proceeds are usually received in cash from underground economic activity and, as such, are not taxed.
• In its simplest form, black money is money on which tax is not paid to the government. Suppose a store accepts cash for its merchandise and does not issue receipts to its customers. That store is transacting in black money, as it would not pay tax on the unrecorded sales.
• As another example, consider a property buyer who purchases land valued at Rs.200,000. If the buyer only reports Rs50,000 on the books and pays Rs.150,000 under the table, then there is a black money transaction worth Rs.150,000.
• The sellers in both examples have earned money from legal sources but evaded taxes.
