Hawala
Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Beyond NCERT
Meaning
Hawala is an informal way of moving money, often across borders, through a network of brokers. No money actually crosses the border and there are no formal records. The brokers settle what they owe each other later. Because it leaves no trail, it is used for tax evasion, money laundering and terror financing. It is an offence in India under FEMA and PMLA.
Example
A person in Dubai gives cash to a hawala broker. The broker calls a partner in Kerala, who pays the same amount, minus a fee, to the relative there. No bank transfer takes place.
Don't confuse with
- Formal remittance: sent through banks or licensed channels. It is recorded and can be tracked by regulators.
Related concepts
- Tax avoidance and tax evasion
- General Anti-Avoidance Rule
- Tax compliance
- Black money
- Money laundering
- Shell company
- Benami transaction