It has been nearly three weeks since the Centre’s demonetisation move that led to the withdrawal of legal tender status of notes worth about Rs 15 lakh crore.
According to the latest data put out by the RBI, about 56 per cent of such notes have come back into circulation. Between November 10 upto November 27, ₹ 8,44,982 crore worth of notes have been exchanged or deposited (exchange amounted to ₹ 33,948 crore and deposits amounted to ₹ 8,11,033 crore).
Has this higher than expected money finding its way back into circulation, prompted the Centre to come out with the Pradhan Mantri Garib Kalyan Yojana 2016?
As per most initial estimates, 20 per cent of the total value of the old notes (Rs 15 lakh crore) was pegged to be in black, and was not expected to come back into circulation.
The ₹3 lakh crore-odd worth of notes would have become useless come December 30. On the RBI’s balance sheet, liability in the form of ‘notes issued’, would have been extinguished to that extent, leading to an increase in reserves. The surplus transferred to the Centre by way of dividends would fill up its coffers. An easy windfall gain, no doubt.
To ensure that hoarders are dissuaded from tendering their booty, the Centre has been dangling the stick and issuing warnings that cash deposits of above ₹2.5 lakh could attract tax plus a 200 per cent penalty, in case of income mismatch.
But a substantial amount of money has still managed to come back into circulation, robbing the Centre of its possible bounty.
Additional revenue
This leaves the task of examining each high value deposit to the income-tax department which may not have the necessary wherewithal to deal with the massive amount of data flow.
To counter some of these issues, the Centre on Monday came out with Pradhan Mantri Garib Kalyan Yojana 2016 to enable people with undisclosed income to come clean.
They would have to fork out a tax of 30 per cent and penalty of 10 per cent. A surcharge in the form of cess of 33 per cent will have to be paid on the tax, taking the total levy to 50 per cent. This is slightly higher than the 45 per cent that was payable under the Income Declaration Scheme (IDS) 2016.
To be fair, it could be that the initial estimates of black money were overstated and the money that has come back is legit. Either ways, the Centre is doing all it can to make the demonetisation move worth its while.