A study of incidence and impact of cash transactions and non-reporting of Permanent Account Number on black money scenario in India

Abstract

In Its aspiration to be a super power, the biggest Road Block India finds is its thriving Black economy. Black economy holds India s financial lungs paralysed with its cancer like tentacles. The sourcing of Monetary requirements, essential for realising India s dreams of improvement in most of the areas namely infrastructure development in Social, human, physical realms, many a times finds a crash landing or of a compromising quality. This is a major concern for India s financial plans in becoming a super power. If one digs deeper into the behemoth of Indian Financial system, more often than not, the search ends in the face of the black hole of a parallel economy which in common parables termed as Black Economy or Unaccounted economy . This study examines the incidence and impact of cash transactions on perpetuating the black economy in India, mainly through the currency in circulation and evaluation of the impact of higher denomination notes in the light of meagre tax base. The study shows how there is a huge need for lower denomination notes among the poor, middle class and lower middle class for everyday transactions as their per capita income is low. It also concludes that the instances of misusing higher denomination currency are very high in unaccounted transactions and currency hoarding. The study analyses use and impact of use of electronic money in the form of debit/credit cards, it also glances upon the impact of Policy of quoting PAN mandatory in certain transactions. But due to many loopholes in implementation, this policy has not been very successful in achieving its objectives. The use of currency and non quoting PAN has paved the way to avoid taxation and removing the trail of transactions forever, thus squashing any opportunity of law catching up. The study suggests that cash transactions and not quoting PAN in transactions do not work in isolation but in tandem to perpetuate black economy in India. It suggests ways and means which if implemented effectively, would go a long way in tackling the menace of black money in India.