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Why black money is prevalent in Indian economy in such large scale that Govt has taken extreme step to defunct Rs 500/- and Rs. 1000/- note.

Govt. has taken strict action to control black money and determined to flush it out from our economy.

India is not a rich country. Most residents here want to earn more and become rich. They want to become rich to have lavish life styles as followed by rich. Movies & media has played important role in changing mindset & lifestyle of Indians, which is once known as country of devtas (devbhoomi) and ‘sone ki chiria’. Diminishing moral values, social values  ad religious values among us  has added more fuel to the problem. So we all want to become rich in shortest possible time. It created the need of black money(avoiding different taxes).

Advantages of doing 2 number business

(1) It is primarily used for avoid indirect taxes & duties and lastly income tax.
(2) To compete with competitors so that less price can be offered to customers.

Disadvantages of doing 2 number business

(1) Logistic & transport cost increase more than double. Transporters charge many time more freight than normal one.

(2) Normally once or twice a year truck carrying these goods are raided by govt. tax authorities. Then Transporters have to  pay a lot as penalty etc. Transporters do not pay it from their pocket, they charge from their customers(dealers) again thus increase further cost.

(3) Maintenance of accounts cost also get increased as the businessman has to maintain separate books of accounts for this purpose.

(4) They sell goods without invoice, so there is always a risk from their customer side not to make payment. The possibility of litigation always remains.

(5) Many time Vat dept & income tax dept raids their showroom, stores & houses further reducing the profit margin.

(6) Lastly they always remain stressed and under pressure. Their nature towards society & family normally remain bitter. They are more adhering to illness & health problems.

So Disadvantages supersede advantage.

If 2 number business is stopped then competitors can’t offer low price so this advantage gets vanished. As far as advantages of tax avoidance is concerned, it is much less than disadvantages associated with it.

Agar bimar ho jayoge ja mar jayoge to paise ka kia karoge.

Our religion also warns against culprit activities. We have to face result of our actions in this world as well next.


The extreme step of Govt. may have planned good strategy but they forget to upgrade the ATMs.. This has caused a lot of pain to people especially poor ones. My suggestion is that

All BPL families should be paid/transferred currency through social workers network at their home. 

Where it will ease bankers, routine transactions can be done at banks in efficient manners.  Govt. should also compensate the sufferers during this revolution. Some social organizations (including our Institute of Cost Accountants of India) have opened help line outside banks to accommodate public. This is a welcome step.

I met different type of businessmen, smaller to bigger ones, BJP as well as non-BJP. All are internally quite satisfied with step and feel happy.

So Let’s pledge that we will do business honesty.

The author can also be reached at cma.sschug@gmail.com


Published by

CMA Sawinder Singh Chug
(Cost Accountant)
Category Income Tax   Report

1 Likes   14 Shares   13407 Views


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