Purpose of demonetization was not the confiscation of cash but to bring it to the formal economy: Jaitley
New Delhi, Nov 8 (KNN) The real purpose of demonetization was not the confiscation of cash but to bring it to the formal economy and make the holders pay tax, said Arun Jaitley, Finance Minister on the second anniversary of demonetization.
"Confiscation of currency was not an objective of demonetization. Getting it into the formal economy and making the holders pay tax was the broader objective,” Jaitley said.
He said, “The system required to be shaken in order to make India move from cash to digital transactions."
He mentioned that demonetization resulted in increasing the tax base and a higher tax collection (both direct and indirect) for the government, thereby improving its fiscal health.
"The Unified Payment Interface (UPI) was launched in 2016 involving real time payments between two sets of mobile holders. Its transactions have grown from Rs. 0.5 billion in October, 2016 to Rs. 598 billion in September, 2018," Jaitley said.
"Bharat Interface for Money (BHIM) is currently used by 1.25 Crore people. The value of BHIM transactions has gone up from Rs. 0.02 billion in September, 2016 to Rs. 70.6 billion in September, 2018. The share of BHIM transactions in overall UPI transactions is at about 48% in June, 2017," he added.
"Larger deposits in banks improved lending capacity for the banks. A lot of this money was diverted to the Mutual Funds for further investments. It became a part of the formal system," he said.
"The impact of demonetization has been felt on collection of personal income tax,” Jaitley said.
He added, “Its collections were higher in Financial Year 2018-19 (till 31-10-2018) compared to the previous year by 20.2%. Even in the corporate tax the collections are 19.5% higher.”