Finance Ministry: Demonetization immensely beneficial to Indian Economy and People
New Delhi, Aug 30: The Government of India decided to cancel the Legal Tender Status of Rs.1000 and Rs.500 denomination currency notes on 8th November 2016 with several objectives:(i) flushing out black money, (ii) eliminate Fake Indian Currency Notes (FICN), (iii) to strike at the root of financing of terrorism and left wing extremism, (iv) to convert non-formal economy into a formal economy to expand tax base and employment and (v) to give a big boost to digitalization of payments to make India a less cash economy.
The Reserve Bank of India (RBI) has reported in their Annual Accounts that Specified Bank Notes (SBNs) of estimated value of Rs. 15.28 lakh crore have been deposited back as on 30.6.2017. The outstanding SBNs as on 8th November, 2016 were of Rs. 15.44 crore value. The total currency in circulation of all denominations as on 8th November, 2016 was 17.77 lakh crore whereas total currency in circulation as on 4th August, 2017 was 14.75 lakh crore. The Government had expected all the SBNs to come back to the Banking system to become effectively usable currency. The fact that bulk of SBNs have come back to the Banking system shows that the banking system and the RBI were able to effectively respond to the challenge of collecting such a large number of SBNs in a limited time. At the same time, the effective currency in circulation today is only 83% with full remonetisation having taken place.
A significant portion of SBNs deposited could possibly be representing unexplained/black money. Accordingly, 'Operation Clean Money' was launched on 31st January 2017. Scrutiny of about 18 lakh accounts, prima facie, did not appear to be in line with their tax profile. These were identified and have been approached through email/sms. More than 9.27 lakh responses were received giving information on 13.33 lakh accounts involving cash deposits of around Rs.2.89 lakh crore. Advance data analytics tools were deployed which further identified 5.56 lakhs new cases and about 1 lakh of those cases in which either partial or no response was received in the earlier phase. Besides, about 200 high risk clusters of persons were identified for appropriate action. The Income Tax Department (ITD) conducted searches on various entities, leading to seizure of cash and admission of undisclosed income. Since November 2016 and until the end of May 2017, a total of Rs. 17526 crore has been found as undisclosed income and Rs. 1003 Crore has been seized. The investigation/scrutiny is going on.