"Illicit financial flows mean that the money that actually is black money, and it is then sent over to tax havens. And in India, a lot of it is happening through trade-based money laundering, over-invoicing or under-invoicing, and a variety of other ways. And then money is leaving the country simply through hawala channels," Sinha said at a UN function.
The Indian Government has taken a series of steps, including enactment of the black money law, to deal with unaccounted overseas assets, he said.
Through transfer pricing mechanism, multinationals move profits to low tax countries and tax havens, thus reducing their tax liability, Sinha said.
Illicit financial flows are estimated to be much higher than those going out by transfer pricing and capital gains, Sinha added.