The move to demonetize Rs. 500 and Rs. 1000 currency tenders by the union government of India on 9th of November 2016 (Tuesday), is a historic effort to clean up the decade's long corruption and black money. As Indian citizens, we all should be proud of the fact that we elected a government, which is capable of taking such brave decision for the long-term betterment of the country’s economy. Nevertheless, there’s a high possibility that a certain percentage of people might interpret this decision negatively in view of the fact that short-lived challenges are to be seen, which might have a profound negative impact and dethrone ruling party in the coming elections, not everyone happens to be aware of the decision’s long-term benefits. If unaccounted or black money isn’t eliminated, it would make the rich richer and the poor poorer. According to SBI, “Banks received deposits worth Rs. 53,000 crore since the government put out of circulation, high-value banknotes in an offer to drain illegal wealth. Nearly 14 lakh crore are held in Rs. 500 and Rs. 1000 notes now – nearly 86% of the total value of currencies of all denominations in circulation” . Ultimately, government will possess an adequate amount of money to invest in infrastructure, education, agriculture, and all other sectors to build India economically stronger.
Above all, every honest taxpayer should appreciate this decision. In the present economic situation, black money has inflated prices in real estate, gold and a few other sectors, making it a challenge for a common people to invest. However the government’s attempt to curb black money will significantly lower the prices in such sectors. According to Finance ministry’s report in 2012, “real-estate accounts for more than 50 per cent of the current black money market”. Demonetization would not only repair internal economic issues, but also tackles funding to terrorism. Also, corrupted government officials and politicians who have earned in illegal ways will have no other option to put that money into usage.
Some opportunists are also using this as an opportunity to earn.
A 10% premium will help you earn up to Rs 60,000 in just a few months if you can use three family members’ accounts.
Just as the government is busy in dealing with this panic situation, a lucrative trade has cropped up where the salaried class are tapped by the tax evaders who are exploring many ways to cut their "losses".
If you are a white-collared private sector employee, agents are likely to approach you with the offer of putting at least Rs. 2 lakh in your bank account, but you have to return only Rs 1.8 lakh after two-three months.
A 10% premium will help you earn up to Rs 60,000 in just a few months if you can use three family members' accounts. The premium may rise to as high as 25% if you can get higher number of bank accounts involving more family members. Higher the sum, better the premium.
As a guarantee to return the money, the people who are depositing the money in the account are also taking a cheque drawn by the bank account holder mentioning the proposed sum. The cheque will be encashed at a later date, mutually agreed upon.
"The scheme is working mostly on trust factor and is a win-win for both. The possibility of cheque bouncing is too little as it is now difficult to withdraw large sums of money from the banks.
Is this the first time demonetization happening in India?
No, this happened 2 times already. 1947 and 1978.
Is it a sudden decision by PM?
No, it’s not an overnight decision, whatever happened (Jan Dhan Yojana for bank account to all, Convert post offices to banks, foolproof Aaadhar for all, Real Estate Bill, GST, Benami transaction Act, Income Declaration Scheme, paper gold, NGO and public trust scrutiny, sophisticated technology to Income Tax department and RBI, More powerful Income Tax Department, Rupees demonetization) and whatever is going to happen (hopefully more reforms on the way) are very well planned by people working under PM.
Will Black money in Gold, Real estate and Benami increase?
Like mentioned above, it’s not a single step. There are many plans in pipeline, eventually everyone will be paying proper tax to government very soon regardless of the mode of black money holding.
What are the options available for Culprits?
Either culprits can deposit the money to bank and pay 60% in tax OR burn the notes and its equal to paying 100% tax to government. So, in any case nation will benefit. Second case is much easier for and more benefit for our nation.
Should Aam Aadmi/small businessmen be worried about tax scrutiny?
No, cash deposit more than 10 lacs in a year in your bank accounts are intimated to taxmen. So, you don’t need to worry about deposits till 10 lacs. At, worst case you need to explain to the taxmen that these are your lifetime savings and pay taxes if demanded. No need to worry for being honest.
What will be the future of cash Transactions?
Government will force everyone (buyer and seller) to open bank accounts and use debit/credit cards. So, everything will be accounted and taxed properly.
There is lot of pain and there will be side effects.
Yes, we have credit cards and can survive with that in metros and big towns, we need to understand the pain people are experiencing in other parts of the nation. All of a sudden their hard earned money became worthless. But on other hand, assume this move as a therapy for a blood sucking disease (black money) which will not be cured by other means and someday it will kill that patient (our nation). So, therapy will be painful and will have side effects for few days. We need to bear this instead watching our nation pulled down by the blood sucking culprits day by day.