November 8, 2016. The day cancellation of the Legal Tender Status of Rs.1,000 and Rs.500 denomination currency notes took place. There was clearly visible popular support for the move.
The opposition went to town crying that demonetization was a disaster and took it as an important election issue as well. Clearly, people didn’t buy their argument. Nevertheless, a certain section still chooses to present demonetisation in a negative light.
For a long time, there was deep resentment in the heart of common people that corruption is the norm and the corrupt indulge in it proudly and openly, with no costs attached. However, demonetisation showed them that now is the time when honest people could hold their head high.
This apart, factually speaking, here are ten reasons that factually demonstrate why demonetisation has worked.
Unearthing of Undisclosed Income
During November 2016 to March 2017:
- Searches conducted led to seizure of Rs. 900 crores, including cash of Rs. 636 crores and admission of undisclosed income of Rs. 7,961 crores.
- About 8,239 surveys were conducted leading to detection of undisclosed income of Rs. 6,745 crores.
Operation Clean Money and Follow-up
- Operation Clean Money was launched on 31st January 2017 to follow up on the action of demonetisation, to create a tax-compliant society.
- Cash deposit data during demonetisation was analysed to identify persons whose cash transactions did not appear in line with the tax payer’s profile.
- This analysis resulted in identification of about 17.92 lakh persons for online verification process in the first phase.
Massive Self-Assessment Tax Netted
- 3.04 lakh persons who deposited cash of Rs 10 Lakh or more but had not filed their return of income till the due date of filing returns were identified.
- 2.09 lakh such identified non-filers responded. These persons paid self-assessment tax of Rs. 6,531 crores.
- Electronic campaigns for other categories of non-filers with and those with potential tax liabilities resulted in overall, Self-Assessment Tax of more than Rs 13,000 crore paid by targeted non-filers.
Greater Increase in Direct Taxes, Breaking from the Previous Trend
- Net direct tax collections for 2017-18 was Rs. 10.03 lakh crore, which is 18% higher than the collections for 2016-17.
- On the other hand, the growth rates in 2015-16 and 2014-15 were only 6.6% and 9.0%, respectively.
- The growth rate of 2017-18 was the highest in seven financial years before it.
- In 2017-18, personal income tax Advance Tax collections increased by 23.4% and Self-Assessment Tax by 29.2%.
- In FY 2018-19, Corporate Tax clocked a growth rate of 16.2% and personal income tax of 12.7%.
- Voluntary tax payments under Advance Tax in 2018-19 continued to increase at a healthy rate of 14.8% with Corporate Advance Tax increasing at 13.4% and personal income tax Advance Tax at 20.1%.
Widening Tax Base
- During FY 2017-18, 6.86 crore ITRs were filed with the Income Tax Department as compared to 5.48 crore ITRs filed during FY 2016-17.
- This showed a stupendous growth of 25%.
- It is the best growth rate achieved in the five years before FY 2017-18.
Spurt in Growth of New Filers
- During FY 2017-18, the number of new ITR filers increased to 1.07 crore, compared to 85.51 lakh new ITR filers during FY 2016-17, a growth of 25%.
- In the years before FY 2016-17, new filers were between 50 lakh and 66 lakh.
- There is a clear upswing in the new tax filers after 2015-16.
- During FY 2018-19, 1.1 crore new ITR filers have been added
- Besides, the number of persons filing return increased from 5.4 crore in FY 2017-18 to 6.3 crore in FY 2018-19.
Greater Corporate Compliance
- During FY 2016-17, 8.01 lakh returns were filed by corporate taxpayers
- During FY 2017-18, 9.38 lakh returns were filed, showing a growth of 17.2%.
- This growth rate is more than five times higher than the growth rate of 3.0% in 2016-17 and 3.5% in 2015-16.
Notes in Circulation Tells the Difference
- The notes in circulation as on November 4, 2016 were Rs. 17,741.87 billion
- The notes in circulation had grown at an average growth rate of 14.51% year on year since October 2014.
- At this rate, notes in circulation would have increased to Rs. 25,122.53 billion as on May 31, 2019.
- However, it increased only to Rs. 21,713.85 billion as on May 31, 2019 (almost 20% lower than would it would otherwise have been).
Digital Payments Became a Way of Life
- In November 2016, the volume and value of digital payments transactions were 833.18 million and Rs. 88,933.35 billion respectively.
- In June 2019, these were 2,368.72 million (184% more) and Rs. 143,378.42 billion respectively (60% more).
- Volume has multiplied even faster than value, showing a broad basing of digital payments even for smaller payments.
Read about the recent trends in digital payments, which is always in an upward trend, in our article Is India Becoming Smart and Transparent? – What Do the Numbers in Digital Payments Say.
Massive Blow to Shell Companies
- The Registrar of Companies (ROCs) removed the names of 2,26,166 companies during 2017-18 and 1,12,797 companies during 2018-19, respectively from the register of companies. These companies had not filed their financial statements and or Annual accounts for a continuous period of two immediate preceding financial years.