Demonetisation

Demonetisation is the act of removing a currency unit of its status of a Legal Tender.

It was done on 8th November, 2016

Government announced that the currency notes of Rs500 and Rs1000 were demonetised

and were no longer legal tender

Objectives of Demonetisation

1 The main objective was to curb black money.

2 To reduce tax evasion

3 To bring back black money into the banking system

4 To stop circulation of fake currency

5 To curb terrorism

6 To Tackle problem of corruption

Features of Demonetisation

1 It was a 'Tax Administration Measure'

People who had black money had to declare their unaccounted wealth and pay taxes for the same

2 Government indicated that Tax Evasion will not be tolerated

3 Channelizing savings into formal financial system

Withdrawing amount from banks will go on

Banks will also continue to provide loans in some new schemes, with lower interest rate.

4 It aims to create a Cash-less or Cash-lite economy

By channeling more savings into formal financial systems

Improving tax compliance

Promoting digital transactions wherever possible

Impact of Demontisation

1 Money/ Interest Rates

Cash transactions decreased

Bank deposits increased

Financial savings also increased

2 Private wealth

Real estate prices fell, so private wealth declined

3 Public sector wealth

No effect

4 Digitisation

Digital transactions increased as new services like RuPay cards, Paytm were on a boom

5 Real Estate

Prices declined

6 Tax Collection

Rise in income tax collection because of increased income disclosure

MCQ Other Books

Q1

In the following questions, select the correct answers:

1 Which of the following is not a benefit of Demonestisation in India?

A Control over corruption

B Counterfeiting use of high demonestisation notes for illegal activites

C Control on black money

D More demanding customers

Q2

Which of the following was not a feature of Demonetisation?

A Channelizing savings into formal financial system

B Tax administration

C Cash less economy

D Promotion of black money

Q3

____ and ____ currency notes of old Mahatma Gandhi series were banned as legal tender money on 8th

November, 2016.

A Rs50 and Rs100

B Rs500 and Rs1000

C Rs100 and Rs500

D Rs500 and Rs2000

Q4

What kind of Tax is GST?

A Direct Tax

B Indirect Tax

C Depends on the type of goods and services

D None of the above