As the year draws to a close, all eyes are on 2017 now with hope for a better year than what 2016, and especially the last two months of 2016, presented. After making the historic announcement on demonetisation, Prime Minister Narendra Modi had asked for 50 days for things to improve and 31st December was announced as the last day for the public to deposit their demonetised currency in the bank. That deadline has now been extended to 31st March 2017 but with conditions. So, going forward into 2017, here is what the citizens of India can expect in the aftermath of demonetisation.
President signs the ordinance
The President of India gave his consent to the Specified Bank Notes (Cessation of Liabilities) Ordinance which will end all liabilities on the government and central banks on the withdrawn currency of Rs 500 and Rs 1000 w.e.f. the midnight of 31st March, 2017. Beyond this date, it will be a criminal offence for anyone to possess the demonetised notes and if caught, the person could face a fine of up to Rs 10,000 or five times the amount of currency held.
The government has been forced to take the ordinance route as it was unable to get the Bill passed in Parliament due to uproar by the opposition. The government plans to present the same as a Bill during the Budget session.
Last date extended to 31st March, 2017
The last date for returning old Rs 500 and Rs 1000 notes to banks has been extended from 31st December, 2016 to 31st March, 2017. However, the currency can be deposited with only certain RBI branches now along with a declaration form. Any misinformation submitted along with cash deposit between January 1 and March 31 could attract a fine of Rs 5,000 or five times the amount of cash deposited.
One last push by government to flush out black money
Those still holding on to black money have been offered one final chance by the government to come clean. On December 17, the government introduced a tax amnesty scheme for people to deposit their unaccounted money into banks or post offices and declare their income by paying a maximum of 49.5% on the declared amount which includes tax, surcharge and penalty.
Furthermore, the scheme makes it mandatory for the depositor to deposit at least 25% of the declared income into Pradhan Mantri Garib Kalyan Yojana (PMGKY) for a period of four years, which will be interest free. This is a good option for those businesspersons who have not declared their income but can now breathe easy by simply paying 49.5% of the amount declared. Those not declaring the same within March 31 but declaring it after this period will face tax and penalties totaling 77.25% of the declared income.
However, those who have acquired cash illegally through bribes etc. will find it hard to take advantage of this scheme. The scheme excludes those holding benami assets, money launderers and other criminals who might try and take advantage of the system.
Income Tax authorities to track all deposits
Be prepared for more government scrutiny into people’s deposits and accounts in 2017. The central government has already clarified that money deposited into bank accounts does not make them white by default. Government is already monitoring 60 lakh individual customers and companies who have collectively deposited around Rs 7 lakh crore into bank accounts.
With increased use of transaction monitoring softwares and data analytics tools, the government will be busy through 2017 in monitoring and separating suspicious deposits from genuine ones, by comparing it with earlier deposit trends. Under this, Jan Dhan accounts that witnessed a spike in transactions post 8 November will also come under scrutiny.
The government has set up an email account – [email protected] wherein citizens can email information about suspicious deposits or black money being hoarded by persons or companies. The identity of the person informing will be kept confidential. This is likely to further add to the government’s efforts in tracing and curbing black money.
Benami properties on government’s hit list
PM Modi has already announced his intention to go after benami properties and 2017 will see some definitive action on this. Real estate is one of the largest channels for funneling of black money. One can expect the Real Estate (Regulation and Development) Act, 2016 (RERA) to be adopted by more states. RERA will protect buyers from unscrupulous developers and also ensure the scope for black money is minimized as transactions will now be cashless and tracked by authorities.
Time to go for digital payments and cashless transactions
A positive fallout of the demonetisation has been the rapid shift to a cashless economy. The cash squeeze has actually prompted small retailers, roadside vendors, auto and taxi drivers etc, to begin accepting e-payments and customers have been willing to comply. 2017 will see more and more people adopt digital payments and this will ultimately help the government in tracking and increasing tax collections.
Prime Minister likely to announce sops in 2017
In his year-end message to the nation on December 31, Prime Minister Modi is expected to defend his decision on demonetisation and back it up with data presented recently by Union Finance Minister Arun Jaitley demonstrating an increase in indirect tax collections, higher foreign fund inflows, increase in coal production etc.
He is expected to announce sops for people to shift to a digital economy. The government has already launched the Lucky Grahak Yojana and Digidhan Vyapar Yojana to incentivise small businesses and traders using digital transaction. With people suffering on account of long queues and restricted withdrawal limits, the Prime Minister is expected to announce an increase in cash withdrawal limit. Given the PM’s penchant for making big announcements, a tentative nation will be looking forward to hear what he has in store for them in 2017.