This Article is From Nov 09, 2016

'It Pays To Be Honest': Arun Jaitley Explains Decision To Abolish Rs 500 And Rs 1000 Notes

Arun Jaitley described the government's decision to scrap 500 and 1000 rupee notes a "gamechanger"

Highlights

  • A longer window would have given people time to evade tax: Arun Jaitley
  • Minister said that source of illegal money would have to be clarified
  • Issues with transition to new notes will be resolved soon: Arun Jaitley
New Delhi: It pays to be honest, said Finance Minister Arun Jaitley today, describing the government's decision to scrap 500 and 1000 rupee notes overnight as a "gamechanger." People with black money are worried, he said.

The minister said the bold move would put an end to the parallel economy. "If a longer window was given, people would have found ways to evade tax," he said, explaining the government's sudden withdrawal on Tuesday of Rs 500 and Rs 1,000 banknotes in the country's biggest crack down against black money, corruption and counterfeit currency.

Teething troubles in the transition to new high denomination notes of 500 and 2,000 rupees would be sorted put soon, the minister promised.

Mr Jaitley said it must be clear that the deposit of the now-defunct notes in bank accounts will "not provide any relief from taxation."

"It should be clear that it is no immunity scheme. This (deposit) does not provide any relief from taxation. The law of land will apply," Mr Jaitley said, but also emphasised, "If the money is legitimate which had been previously withdrawn from the bank or earned legally and saved and had been disclosed, there is nothing to worry about."

However, he said, if it is illegal money, the source will have to be disclosed, and it could land a person in trouble.

Prime Minister Narendra Modi made the currency announcement in an address to the nation on Tuesday evening and detailed how citizens left holding the invalid money could exchange the notes at banks and post offices.

The Finance Minister today said housewives and farmers with genuine savings need not worry about depositing cash in their bank accounts. "The small amounts that people will deposit like Rs 25,000, 30,000 or 50,000 lying in house for expenses, whatever money could be there for meeting normal family expenses they need not worry. They can go to banks," he said.

The minister said for the first one or two weeks there could be a shortage of the replacement currency, but he expected it to be streamlined after 2-3 weeks.

The move would help make more transactions digital, he said, adding now people would disclose income and pay taxes. "India will become a more tax compliant society," Mr Jaitley said.

"It will have a positive effect on the Indian economy in the long run," he added.