- Demonitisation is a key step in a chain of important decisions taken by the Government to formalise the economy.
- Technology has been used for both Direct and indirect taxes to facilitate filing of returns and expanding the tax base.
THE ROLE OF CASH
- India was a cash dominated economy. Cash involves anonymity in transactions. It bypasses the banking system and enables its possessors to evade tax.
- Demonitisation compelled holders of cash to deposit the same in the banks.
- The enormity of cash deposited and identified with the owner resulted in suspected 17.42 lakh account holders from whom the response has been received online through non-invasive method.
- Larger deposits in banks improved lending capacity for the banks.
THE MISCONCEIVED ARGUMENT
- Confiscation of currency was not an objective of demonitisation. Getting it into the formal economy and making the holders pay tax was the broader objective.
EFFECT ON DIGITISATION
- The Unified Payment Interface (UPI) was launched in 2016 involving real time payments between two sets of mobile holders.
- The Bharat Interface for Money (BHIM) is an App developed by NPCI for quick payment transactions using UPI.
- The RUPAY Card is used both at the Point of Sale (PoS) and for e-commerce.
IMPACT ON DIRECT TAXES
- The impact of demonitisation has been felt on collection of personal income tax.
- Its collections were higher in Financial Year 2018-19 (till 31-10-2018) compared to the previous year by 20.2%.
- In the first four years of this Government, returns have increased to 6.86 crore. By the time the first five years of this Government are over, we will be close to doubling the assesse base.