Note ban helped root out fake currency: DEA Secretary

Finance Ministry backs demonetisation, CBDT says it helped nab black money hoarders

New Delhi, August 31:  

Taking on critics who have questioned the note ban exercise after the Reserve Bank of India’s annual report said that most junked notes were returned, the Finance Ministry on Thursday said that fake currency was rooted out of the system and old notes will now no longer be permitted to be returned.

Subhash Chandra Garg, Secretary, Department of Economic Affairs (DEA), said “₹16,000 crore of currency is still out of the banking system.” He further added that there is no way that the demonetised currency notes can now be returned.

“Despite the rush to exchange demonetised notes, the system was careful not to bring fake currency into the system,” he said.

He also argued that fake currency was actually rooted out of the system. “This has had a positive impact on curbing terrorist activities in places like Kashmir,” he told reporters.

Meanwhile, the Central Board of Direct Taxes also came out in support of the exercise and said it has had a significant impact on widening the tax base, increasing tax revenue and flushing out black money hoarders.

“The government launched a concerted drive against black money with demonetisation being an important step in that direction,” said the CBDT, adding that it has led to admission of over ₹29,000 crore of undisclosed income.

Activities such as searches, seizures and surveys also increased by over 100 per cent since the note ban.

Tax receipts up

Similarly, the number of taxpayers has also increased while direct tax collections post demonetisation has risen. By August 5, collection of advance tax for personal income tax had risen by 41.79 per cent compared to a year ago.

The government had demonetised old series ₹500 notes and ₹1,000 notes in November last year to curb black money and fake currency notes.

In the first official data on how much of the currency was returned into the banking system, the Reserve Bank of India on Wednesday in its annual report had said that 99 per cent or ₹15.28 lakh crore of the ₹15.4 lakh crore of the junked notes were returned.

Stressing that it was never the expectation that all these junked notes would not be returned, Garg said most families had high value currency notes and they used it for making payments during the pre-demonetisation era. “I think there was a clear expectation that much of it would come back.

“Whether all of it would come, people had different estimates and guesses. But the Centre never said that it expects any currency not to come back,” he said.

Finance Minister Arun Jaitley had also spoken on the report and said that the objective of demonetisation was on predictable lines.

(This article was published on August 31, 2017)

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