Question

State any three features of 'Demonetization'.

Answer 1

Features of demonetization are: (i) Demonetisation is viewed as a tax administration measure and people with black money had to declare their unaccounted wealth and pay taxes at a penalty rate. (ii) Demonetisation is also interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated or accepted. (iii) Demonetisation led to tax administration channelizing savings into the formal financial system, to enable banks with deposits to provide a base for loans, at lower interest rates. (iv) It creates a less-cash or cash-lite economy, i.e., channelizing more savings through the formal financial system and improving tax compliance.