Black money is generated due to the following reasons:
- The people do not pay their taxes. Even if they pay taxes, they are not in correct proportions to their incomes. The tax evasions by corporate and industrial houses are to the tune of billions of rupees. These firms are able to make clever usage of the income tax rules and hence, they save taxes. This tax evasion leads to the generation of black money.
- The black money is earned by gifts, hawala transactions and illegal foreign exchange deals. These deals are not scrutinized by the government simply because these are without any documentary evidences.