Black money is money generated via tax evasion which is generally in cash and not traceable.
Actual demonetization process :
Step 1 : Convert all the black money to white by charging people a specific rate of tax, and depositing all of it in banks. (Leads to huge deposits in banks)
Step 2 : Banning big currency notes of 500 and 1000 only leaving small currency notes.
Step 3 : Demolishing most of the taxes and implementing one tax that would be on bank transactions.
Impacts :-
1. Only small notes would prevail in the economy which would lead to people not keeping huge amounts of cash as it would be practically difficult keeping such large amts of cash. High value tranactions in cash becomes impractical. (Tranactions through bank shall be charged to tax, leading to adequate funds for government. Daily amount of RTGS transaction in india is 2.5 lakh crores( on RBI’s site) imagine when cash pools up and tax is charged to it what the amount would be.)
2. Most of the transactions taking place through bank, transactions are traceable unlike when done in cash.
3. Terrorists funding shall be easily stopped as they would either need big lots of cash or bank account (traceable) for transaction.
4. Fall in fake currency to a great extent as printing of small currency becomes non viable.
5. Great boost to GDP of economy.
6. Ease of taxation as maximum taxes are aboliahed leading to no tax evasion which further leads to stopping of generation of black money.
7. Corruption decreased by great extent as most transactions are via cash.
8. Great fall in rates of interest charged by banks to public.
9. Commodities, facilities become cheaper as taxes on them are abolished.
Actual scenario : Introduction of new currency notes corrupts the whole idea of abolishing black money. I agree to the fact that somewhere a good amount of black money will be destroyed in one stroke, but introduction of new notes would make generation and keeping of black money in future easy and handy, as people will keep making black money in same ways as they did earlier (Tax evasion, Bribes etc.)
Do not fool yourself by the idea that black money generation stops in future or completely abolished as people having them have enough measures to displace there money(not all but a good portion of it can be saved by every individual.)
If this theory is correct which being an average commerce student appears correct to me :
Q1. All efforts and problems faced by general public which they are willingly accepting to do, to see a better future are all waste?
Q2. What about the impact/damage on our economy which happens to stand kinda still due to non availability of cash in these days?
Disclaimer : I do not support any political party and all the above said views are only my personal opinions, general information and for a common man’s understanding also only true to best of my knowledge.
#involve in conversations not debates.
ll know the truth but richest thinking is so poor they want put their money in beds only because they feel their money is secure in their custody.
It would have been a fantastic step if it had long term impacts. Good portion of undeclared money is with the upper middle class people who have numbers of ways to preserve that again and of course in small area now. The actual black money which is hampering the country is hovering and not hoarded in any particular treasury. The government must play serious. By taking such an action it has proved again that Mr. Prime Minister’s acts are just like his talks, only to strike mind of common men but having no results………. .
i am on the same basic premise as the author Rahul Chawla.
We are wanting to do away with Black Money. That is the idea. No ?
We all know Black Money is that money which is generated by illegal means OR income which is generated by proper legal means and transactions but on which Tax is not paid. It is this latter Income that accounts for almost 80 -90 % Black Money. And it is this portion which needs to be tackled.
If Govt is able to collect Tax on this income then, the Black Money is removed. Yes ?
The present scheme is devoid of any tax collection except on some adventurous deposits in spite of the provision of applicable Tax + 200 % penalty, scrutiny harassment and impeding criminal proceedings leading to imprisonment. Hence, in this whole demonetization scheme and its plan, I don’t see that the Govt will collect worthwhile tax or revenue worth the effort. However of-course, huge amounts of currency will get redundant and get out of circulation but, no Tax revenue to the Govt.
The Govt could have scored double. if it had made Bank Deposits softer and attractive by allowing tax on deposits at the current level or somewhat similar structure like (suggested):
Deposits upto 2 Lac – No Tax
2 – 5 Lac – 10 % Tax
5 – 10 Lac – 20 % Tax
More than 10 Lac – 30 % Tax
I have no doubt this will lead to deluge of Tax revenue collection of unprecedented proportion, so much so the Govt would not be able to count it
I think the Govt must have thought of it as well but , they may have decided not to do it because it would undermine its credibility of fairness due to just ended IDS Scheme with 45 % Tax on Voluntary Disclosures. In my opinion IDS itself was similarly unfair to those who had declared full income and paid tax earlier. So, it should not matter at all. Such things are known to be repeated in the past to meet the targets and increase Tax Collections as per the circumstances and this huge step of demonetization is a desperate measure and overrides any other issue.
Consider the effects. if Tax is collected as suggested above, all the hoarded money comes into circulation. No Black money left. No parallel economy. Govt gets flush with funds. High investment by Govt in the stuck up and, new infrastructure projects. The Tax rate reduction will lead to disincentive to indulge in Black Money generation any further.
The present scheme of demonetization is no guarantee to stop Black Money re-generation. And periodic Demonetization is neither possible nor the right way for a permanent solution to menace. The Only Permanent Way is to discourage its generation. This can be achieved only with Lower Tax Rate and better control. With computerization and inter departmental information access, large amount of loopholes can be plugged which, no doubt are being done already.
So, Demonetization along with attractive Tax rate and no penalties on unrestricted amount of Bank Deposits is the only way and the right way to flush out the Hoarded Cash and generate windfall Tax collections leading to reduced Taxes in future and other multiple benefits is what I would propagate.
Thanks
Arun Mittal
Very few people are ready to understand what you all people are trying to say. I cry for my fellow country men as they always misguided, if our PM would have said that this process is to clean out counterfeit I would have supported him whole heartedly. But again our ignorant country men are made to suffer and this whole process will come out as JUMLA. I really feel sad for our country men who never foresee what is coming and by the time they realize they are already befooled.
I fully agree with the idea of PM but see this is the time of thousands & lacks of marriages in the country how they people will manage. In my opinion Our respected PM should do one thing, After full Verification about the marriages to be held they can withdraw their money from banks without any queue by prior permission by the branch manager. Another step Our PM can do for this verification that at the time of marriage one person or a team can visit the marriage venue to find out the actuality. So Plz find out a way……
Nice ideas
I fully support the opinion of Rahulji,
Allowing all black money to be deposited at the banks and charging special rate of Tax. It will have a tremendous effect in collection of revenue
Secondly to implement transaction tax in place of all direct taxes. It will definitely fetch more revenue and shall decrease expenses for maintaining the present machinery for collection of revenue and also to diminish the litigation at different forums substantially.No question of collection of Tax -No question of generation of black money.
sharad Pawar supports modi & even then if nothing rings any bell then, i should doubt my intelligence.
I dont understand how this pm is going to ban black money with no action on Big corporates with 6 lakh crores NPA. Which can be recovered with acting obly on 6 big corporates. Instead he is ready to give trouble to whole nation.
And introducing 2000 notes in name of curbing black money.
In my opinion, the whole exercise in without any proper planning, taking into advice of experts, in haste and to gain political mileage, the cost of demonetizing and printing new notes, logistics etc. are on records by any govt or media, its on the Exchequer. The hardship is being faced by poorest of poor, lower middle and middle class and upper middle class in spite of the fact they have paid their share of taxes honestly by VAT, Excise, Income Tax and what not??? The measures taken and shown by the govt for what they said, “Controlling of Corruption, black money, drugs, terrorism, etc etc if neither eradicated nor controlled, will Ho’nble PM take responsibility for mismanagement and chaos and resign?
This type of currency ban is without authority of law hence should not be sustainable
First a act should be passed by parliament and assembly and then it can be banned
There r thousands ways to withdraw black money and
Prevent terror.
This is a harsh n unbearable step .
It is not possible in a democratic country
First put the country under Marshall law and then such type of steps can be taken
Demonetisation will have definitely some salutary effect. Circulation ohd notes from Pakistan comes to an end