With 76 per cent of the junked currency coming back into the banking system, Finance Minister Arun Jaitley on Thursday warned that mere depositing of old notes in banks will not change the money from ‘black to white’ and tax liability would remain on unexplained funds. Less than a month after the government demonetised old Rs 500 and 1000 notes in its biggest step to fight black money, corruption and counterfeit currency, nearly Rs 11.85 lakh crore out of the Rs 15.44 lakh crore junked notes were back into the system.
“I may only clarify that merely depositing money in the bank doesn’t mean that it changes colour from black to white. Its tax liability would still remain because what is unexplained would still remain taxable,” he told reporters.
At a briefing called to announce measures to promote digital mode of payments, he said money deposited in banks will be closely scrutinised to establish tax liability. “And therefore what is deposited in banks will be closely scrutinised to determine the tax liability on that money. The mere fact that money is coming to banks doesn’t make it to change colour,” he said.
The zero-balance Jan Dhan bank accounts, opened as part of financial inclusion campaign and to transfer government benefits, including subsidy, directly to beneficiaries, have seen Rs 36,809 crore of deposit in last four weeks even though the amount being deposited is now fast decelerating.
Jaitley said the government campaign to incentivise people to go digital and shed cash to the extent possible is good for the economy. Asked if he would encourage political parties to accept donations in digital mode, he said it would inevitably be the future course. “If it becomes digital, if it becomes smaller donation, if it becomes lesser donation from a larger body of donors it will be a great day for Indian democracy,” he said.
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The Finance Minister said he has been repeatedly stating that there is a cost of dealing in cash both to the economy and to the political system. “After all internationally if you have seen in large democracies, lakhs and millions of people donating small amounts online to political parties,” he added.