Monday, 18 July 2022

Methods to Generate Black Money

 Methods to Generate Black Money:

Methods of Generating Black Money: The simplest method of generating black money is to avoid declaring or disclosing one's income or the activities that led to it. This is the most likely course of action in all cases involving criminal, unlawful, and improper activity. It is also possible to avoid declaring or reporting activities and the income earned as a result of these failures. This strategy can be used in circumstances of failure to comply with regulatory responsibilities or tax evasion on income generated through authorised operations. However, complete avoidance or non-compliance may put such incomes at risk of being discovered by authorities, with the resulting consequences being detrimental to the generator. The development of this type of black money, therefore, frequently involves a more complex method that involves the manipulation of financial records and accounting information. Tax evasion is the intentional misreporting or non-reporting of financial transactions in the books of account of a business.

In the following sections, we will discuss the various types of financial statement manipulations that result in tax evasion and the formation of black money:

Transactions that do not appear in the book

Books of Accounts that are kept in parallel

Accounting records are being manipulated.

Manipulation of sales / receipts is prohibited.

Production is under-reported by a large margin.

Expenses are being manipulated.

The use of international transactions to manipulate the market through the use of associate enterprises

Capital Manipulation is the act of manipulating money.

Manipulation of the stock of the closing company

Capital Expenses are being manipulated.

A number of them can be explained as follows:

Transactions that do not take place in a book:

This method is one of the simplest methods available, which is why it is so often utilised in practise. These businesses include modest grocery stores, unskilled or semi-skilled service providers, and other similar enterprises. Transactions that may result in receipts or income being subject to taxation are not recorded in the books of account by the taxpayer in this situation. The taxpayer either does not keep books of account or keeps two sets of books of account, or he or she merely reports partial receipts. Manipulation of Books of Account: Under the Companies Act, the Banking Regulation Act, and the Income Tax Act, books of accounts are needed to be maintained. It becomes increasingly difficult for tax payers to conduct out-of-book transactions or to keep parallel books of account as a result of this. Such individuals use the assistance of bookkeepers in order to avoid paying taxes.


Mocking the Balance of Payments: Mocking the balance of payments is possible by washing untraceable funds or by putting them into the books of accounts. Shares purchased at a premium, fictitious gifts and capital gains, the purchase of phoney losses, and other methods of manipulation are all possible. 


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