Arun Jaitley cites rise in tax payer base to justify demonetisation

The larger purpose of demonetization was to move India from a tax non-compliant society to a compliant one, and invalidation of non-deposited currency was not its only objective, Finance Minister Arun Jaitley said today.

His comments come a day after Reserve Bank of India said that almost all the Rs 500 and Rs 1,000 notes made illegal in November 2016 have returned to the banking system.

Reeling out data on increase in taxpayer base to justify the unprecedented demonetization which overnight sucked out 86 percent of the currency in circulation, Jaitley wrote in a Facebook blog that "this necessarily involved the formalization of the economy and a blow to the black money".

He further said: "Was the invalidation of the Non-deposited currency the only object of demonetization? Certainly Not."

Banks received Rs 15.31 lakh crore or 99.3 percent of the Rs 15.41 lakh crore worth of Rs 500 and Rs 1,000 notes that were in circulation on November 8, 2016 -- the day when the note ban was announced, according to the RBI.

This means that just Rs 10,720 crore of the junked currency notes did not return to the banking system. Initial estimates had pegged that around Rs 3 lakh crore worth of demonetized notes would not return to the system as they might have been stashed away illegally to avoid taxes.

Jaitley said that when cash is deposited in the banks, it loses anonymity and can be identified with its owner.

"Accordingly, post demonetization about 1.8 million depositors have been identified for this inquiry. Many of them are being fastened with tax and penalties. Mere deposit of cash in a bank does not lead to a presumption that it is tax paid money," he said.

He reeled out numbers to support his claim - number crores come tax returns filed growing from 3.8 crores in March 2014 to 6.86 crore in 2017-18; number of new returns filed post demonetization increased by 85.51 lakh and 1.07 crore in the past two years; advance tax in the first quarter of 2018-19 witnessing a rise of 44.1 percent in personal income tax and 17.4 percent in corporate tax category; and income tax collection increasing from Rs 6.38 lakh crore in 2013-14 to Rs 10.02 lakh crore in 2017-18.

"When the impact of demonetization and other steps is analyzed, the Income Tax returns have increased by 19 percent and 25 percent. This is a phenomenal increase," he said. "The growth of income tax collections in the pre-demonetisation two years was 6.6 percent and 9 percent. Post-demonetisation, the collections increased by 15 per cent and 18 per cent in the next two years. The same trend is visible in the third year."

This, he said, is the positive impact of demonetization.

"More formalization of the economy, more money in the system, higher tax revenue, higher expenditure, higher growth after first two quarters," he added.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)