The Prime Minister Narendra Modi, scrapped 500 and 1000 rupee notes on November 8th 2016. This was a brilliant move which destroyed corruption and black money in India. Tax evaders had no place to hide. The Prime Minister introduced the Pradhan Mantri Garib Kalyan Yojana 2016, to give tax evaders a chance to declare their black money. The last date to declare black money under this scheme is 31st March 2017. Tax evaders with all escape routes cut, had no choice but to declare their black money under this scheme. You declare your black money and pay a tax + penalty + surcharge = 50% of the amount deposited. Then a 4 year lock-in for 25% of the undisclosed income. Now, all this hidden black money is put to use for the growth of the Nation.
The Government is taking the fight against tax evaders to the next level. The Government has started ‘Swachh Dhan Abhiyan’ or the ‘Operation Clean Money’ initiative. The IT Department has sent SMS and emails to 18 Lakh citizens. These citizens have been asked to explain suspicious deposits of over INR 5 Lakhs, deposited in banks between November 10th 2016 to December 30th 2016. How is the Government catching tax evaders? The Income tax department is using data analytics to catch tax evaders. Clearly there’s no escape.
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After the Government scrapped 500 and 1,000 rupee notes, you and other citizens lined up at banks and post offices to deposit old notes, within the deadline of 30th December 2016. You and other citizens deposited money in savings bank accounts and current accounts. Current accounts and savings bank accounts (CASA), are low cost deposits. Banks pay you very less interest on savings bank accounts and no interest on current accounts. This gives banks, room to cut lending rates charged on home loans. Just take a look at home loan interest rates offered by public sector banks and some private banks. Most of them have been cut.
One of the biggest benefits of demonetization is making India a cashless economy. When all transactions are through electronic channels like debit/credit cards, UPI, NEFT, BHIM App, Mobile wallets and Aadhaar enabled payment systems, India becomes a cashless economy. Demonetization is pushing India towards becoming a cashless economy. Before demonetization, India was a cash based economy, where cash transactions accounted for more than 95% of all transactions.
After demonetization, Government replaced old 500 and 1000 rupee notes, with new 500 and 2000 rupee notes. Banks did not have advance warning on demonetization (secrecy had to be maintained) and there were not enough new 500 and 2000 rupee notes to go around. Banks had to impose cash withdrawals on how much money you could withdraw from your bank accounts. Currently, you can withdraw a maximum of INR 24,000 a week from your bank account.
The Government temporarily turned off the cash engine. Today, there is sufficient cash to go around. But, something great has already happened. You and other citizens have already adopted digital payments like UPI, BHIM App, Aadhaar enabled payments, debit/credit cards, mobile wallets and so on. Clever shopkeepers have introduced payment systems where you pay by mobile wallets or through debit/credit cards. Their businesses are doing well. Supermarkets/Malls already offer such facilities.
Initially you and other citizens were afraid to adopt digital methods of payment. This is the fear of the unknown….Today, you and several of our citizens have easily adopted cashless methods of payment. Going cashless is very convenient….Going cashless is safe.
Yes, demonetization has the power to change your habits. Instead of hiding cash in your locker and home, you will deposit it in the bank. You will adopt digital payments instead of paying in cash. You will have to pay your taxes in time. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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