DEMONETISATION:-
The main aim of demonetisation was to curb corruption, check on use of notes for illegal activities and specially the accumulation of black money generated by not declining in income to income tax authorities.
FEATURES OF DEMONETISATION:-
1- Demonetisation as a tax administration measures: Due to administration people had to declare their cash holding to get it exchange from bank. So, those having black money had to declare their unaccounted wealth and pay taxes at penalty.
2- Non–tolerance of Tax Evasion:
Demonstration also indicated that government will no longer accept tax evasion.
3- Tax Administrating and Mobilization Of Saving: Demonstration led to tax administration channelising savings into the formal financial system. As much of the cash deposited by people for exchange will be offered tax people for loan under new schemes.
4- Creating less Cash or Digital Cash lite Economy: Another feature of demonetisation is to create a less cash or cash–lite economy i.e. channelising more saving through the formal financial system and improving the compliance.
Although there are arguments against these digital transactions:
I. They require use of cell phones for customers and POS machines for businessmen.
II. Requirement of Internal connectivity.
These disadvantages are balanced by the understanding that it helps people in the formal economy by increasing financial savings and reducing tax evasion.
IMPACT OF DEMONETISATION:-
1- Money/Interest Rates:
• Decline in cash transactions.
• Bank deposits increased.
• Increase in financial savings.
2- Private Wealth:
• Declined, since some high denomination notes of 500 & 1000 were not returned and real estate price fell.
3- Public Sector Wealth:
• No Effect
4- Digitalization:
• Digital transactions among users increased.
5- Real Estate:
• Price declined.
6- Tax Collection:
• Rise in tax collection because of increase disclosure.
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