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    Document 4

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    aamiralishiasbackup1

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    Chapter CONCEPT OF DEMONETIZATION 71 Demonetization 3 onetization is an act to ce 3 pam raat ict to cease a currency unit or to put an official stop on its status as a legal tend on November §, 2016, the government announced a historic measure, with profound implications for the economy. The two largest denomination notes, %500 and 1000, were demonetied” with immediate effect, ceasing to be legal tender except for a few specified purposes, such as payment of utility bills. 86 percent of the cash in circulation was thereby rendered invalid. These notes (invalid currency) were to be deposited in the banks by December 9, 2016, while restrictions were placed on cash withdrawals. In other words, restrictions were placed on the convertibility of domestic money and bank deposits. 372 Aim/Objectives of Demonetization im of this action was four fold : he 1. To curb corruption. Primarily demonetization focused on curbing out the excessive corruption existing in the country. It was a step taken to stop people from indulging into activities like offering bribes, getting into money laundering etc. 2 To control counterfeiting. Counterfeiting simply means fake currency. Through gemonetization, government aimed to stop fake currency circulation in the economy and render the ones already in circulation, useless. 3, To stop use of currency for illegal activities. Another major reason to explain the move of demonetization and its suddenness was to stop the usage of Indian currency for financing the terrorist activities which used to occur through old 500 and 1000 rupee notes. 4 To stop accumulation of Black money and bringing it back to the economy. The central thought behind demonetization was to tender the black money in the hands of people (who possessed it) useless, and to stop and destroy the shadow economy, operating parallel to ‘mainstream economy. Black money is basically the unaccounted money which is not recorded anywhere and is the income evaded from Tax as this money has not been declared to the tax authorities. 37.3 Features The main features of Demonetization are : 1, Measure of tax administration Pethaps the most important way to view demanetiztion i aq tx aninebatlg aa designed to tax holdings oliblad maney. Of course, demonetization ot Bas denomination mote fs not exactly the same as demonetization of black. money. Some cash holdings Ware perfectly “white the fruit of income upon which taxes had either Deen paid or had not been applicable in the first place (agricultural income, for example) Accordingly, the scheme seeded a roaring, meciamiesy aimed st separating

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