Author
LoansJagat Team
Read Time
6 Min
24 Jul 2025
Black money is money earned through illegal means or legal income that is not reported for tax. It is usually received in cash and kept hidden to avoid paying taxes.
In the film Sivaji: The Boss, Rajinikanth’s character Shivaji faces black money while trying to do good for society. A corrupt businessman hides crores of rupees in cash, avoiding taxes and using the money for personal gain.
Here is an example of how black money may be hidden:
In such cases, the hidden income becomes black money as it is not declared to the tax authorities. Shivaji’s mission shows how black money affects the system and how recovering it can help society.
Black money is income on which no tax is paid. It is often earned through legal activities but kept hidden from tax authorities. This can happen when people or businesses deal in cash and avoid recording their income officially.
In the above case, the buyer avoids paying tax on most of the property value, which leads to revenue loss for the government.
Black money damages the economy silently but seriously. Since it stays outside the legal system, it reduces trust in markets and makes planning difficult for the government. Combating black money requires strong regulation, awareness, and honest reporting by all.
Black money causes many problems in society. It often leads to more corruption. For example, when businesses earn large profits in secret, they may pay the police to ignore their illegal actions.
Over time, this can turn honest officers into corrupt ones who not only ignore crimes but also take part in them. Some people even earn black money through very wrong activities, such as human trafficking.
While black money is often harmful, it has offered some relief in places where strict or unfair laws have made normal life difficult. In such cases, black money has helped people meet their needs, protect their rights, or survive in harsh systems.
In the former Soviet Union, many everyday business activities were against the law. Shops often had empty shelves, and people could not buy basic goods.
To solve this, people turned to the underground economy. By earning and spending black money, they got access to food, clothes, and tools that were otherwise banned or unavailable.
In some countries, governments have treated certain groups unfairly. They banned some races from owning land, starting businesses, or investing in the stock market. These unfair rules forced many people to work in informal areas where rules were fewer.
There, they could earn black money and support their families, even when the system was against them.
In these cases, black money acted as a tool for survival. It helped people live more freely, even when the laws were harsh or unfair.
People who hold black money often try to turn it into white money, that is, legal money. This process is called money laundering. While doing this, they try to hide the money’s illegal source. However, the law takes money laundering very seriously. Legitimate businesses must be extra careful so they do not get involved in it by mistake.
One common method of money laundering is the hawala system. This is an informal way to send money across countries without using banks or paperwork.
For example, if someone in the United States wants to send $20,000 to a person in India using hawala, they give the money to a local hawala agent.
The agent contacts another agent in India, who gives the same amount (in rupees) to the receiver. No actual money crosses borders, and the exchange rate used is often much higher than the official one. Everything is based on trust and secret codes.
Money laundering methods may seem clever, but they break the law. Authorities can impose strict penalties if someone is caught. So, knowing how these systems work helps honest people avoid risks and stay safe.
Black money harms the country in many ways. When people hide income and do not pay taxes, the government collects less money.
This means less spending on public services like hospitals, roads, and schools. It also increases corruption, weakens trust in the system, and affects honest businesses.
Black money may seem helpful to some in the short term, but it causes long-term harm to the economy and society.
Black money is money that people earn but do not report to the government, often to avoid paying taxes. It usually comes from illegal activities or unrecorded business deals. Black money harms the economy by encouraging corruption and reducing tax income. Although it may sometimes help people in unfair systems, it mostly creates problems.
1. What is black money?
Black money is income that people do not report to the government to avoid paying taxes.
2. How do people earn black money?
People earn black money through illegal trades, bribes, or unrecorded business deals.
3. Why is black money a problem?
Black money reduces tax collection, increases corruption, and harms the economy.
4. Can black money ever help people?
In strict or unfair systems, black money has helped some people meet basic needs.
5. How do governments fight black money?
Governments use tax checks, banking rules, and strong laws to catch and stop black money.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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