The finance minister's blog post comes on the second anniversary of demonetisation.
Finance Minister Arun Jaitley on November 8 said in a blog post that “demonetisation is a key step in a chain of important decisions taken by the government to formalise the economy.”
The blog post comes on the second anniversary of demonetisation.
Reacting to criticism that demonetisation led to “the entire cash money got deposited in the banks,” Jaitley said, “Confiscation of currency was not an objective of demonetisation.”
“Getting it into the formal economy and making the holders pay tax was the broader objective,” Jaitley said.
“The system required to be shaken in order to make India move from cash to digital transactions. This would obviously have an impact on higher tax revenue and a higher tax base,” Jaitley added.
The finance minister said that demonetisation’s impact was also felt on income tax collections which were higher in FY19 (till October 31, 2018) by 20.2 percent compared to the previous year.
“Similarly, in the year 2017-18, the tax returns filed reached 6.86 crore, an increase of 25 percent over the previous year. This year, as on October 10, 2018, already 5.99 crore returns have been filed which is an increase of 54.33 percent compared to the previous year till this date. The new filers added this year are 86.35 lakh,” he pointed out.
‘Money diverted to mutual funds’
Jaitley said that demonetisation compelled cash holders to deposit the same in banks.
“The enormity of cash deposited and identified with the owner resulted in suspected 17.42 lakh account holders from whom the response has been received online through non-invasive method,” he said.
“A lot of this money was diverted to the mutual funds for further investments. It became a part of the formal system,” he added.
Positive impact on digitisation
The finance minister also pointed out at the demonetisation’s effect on digitisation. Jaitley said that the Unified Payment Interface (UPI)’s transactions grew from Rs 50 crore in October 2016 to Rs 59,800 crore in September this year.Jaitley added that the value of Bharat Interface for Money (BHIM) transactions went up from Rs 2 crore in September 2016 to Rs 7,060 crore in September this year.