Demonetisation 2.0 by PM Modi

DEMONETISATION 2.0

Demonetisation in India took place six years ago on 8 November 2016 by the Government of India. It was an attempt made by the Indian government to flush out the black money from the Indian capital circulation and expansion of the formal sector of the market but hasn’t been as successful as government thought

After that people are questioning the Indian government’s ability to detect black money or tax evasion but the Indian government is not as as naïve as we think.

Let me explain:

Honorable PM Narendra Modi made a statement in 2020 that was later confirmed by the CBDT, and it reads as follows:

“More than three crore people visited other countries on business or for pleasure. Additionally, many people bought cars. However, the situation is such that barely 1.5 crore people out of a population of over 130 crores have paid income tax.

Let’s elaborate the aforementioned statement in terms of tax evasion or black money:

People are going abroad and making the expenditure in the foreign currency which means they are earning good amount of money that’s why they have the ability to spend abroad but still they are not paying taxes on such income because that was the black money.

Further, people have money to buy luxury cars, Mobile phones, and other luxury items yet they avoid paying income taxes on such income.

You must be aware that the Indian government has made it mandatory for taxpayers to file their income tax returns regardless of whether they have earned income or not. For instance, even if your income is within the taxable limit but your international travel expenses exceed 2 lakhs, you must file an income tax return.

In order to identify the offender, the government therefore tracks both our income and our expenditures. If our spending is out of proportion to our income, the government will assume that we are engaging in tax evasion. I think this will be demonetisation 2.0

Someone will now counter that they will also make cash expenditures. It’s not that simple to track them. Let’s take an example:

Mr. Chiku spend Rs. 1,50,000 on a phone, but he has stated an income of about Rs. 4,87,760 to avoid paying taxes as we all know that person having income below 5,00,000 gets rebate u/s 87A of IT act. Now if you purchase such a cell phone through Amazon or Flipkart and pay cash on delivery, it will be recorded at such websites that a particular person has paid cash and such websites have your phone number and all the details.

Now you will be wondering how government will find you. Let’s discuss that:

• In the future, the government may establish regulations requiring those websites (amazon, flipkart, paytm, google pay, etc) to submit a form having details (phone number, name, address, etc) about consumers whose cash purchases exceeding a specific limit.
• Now you are wondering that you have not provide your KYC ( aadhar or PAN card) to such websites while buying the products then how government will track you.

So the climax is here : Government have your phone number and your phone number is linked with aadhaar number which is linked with your PAN number.

• BOOM! Now the government have your PAN number Now it’s easy for them to compare your expenses with income shown in your return and On the basis of such information, the government can conduct a thorough assessment and levy taxes that are significantly more than what they would have paid if they had consistently declared their income.
• For such taxes, you might read section 115BBE along with Section 69C (Unexplained Expenditure) of the Income Tax Act which states that such income would be taxed at 78% (effective tax rate)

Therefore, it will always be advised to pay the due taxes on time.

Hope this will be eye opener…