Due to withdrawal of old high-value notes, the idle/hidden cash has come into the formal system which will be utilised for productive purposes, says the Revnue Department
New Delhi : Demonetisation will lead to a wider tax base and lower interest rates, thus paving the way for “sustainable faster economic growth”, the Finance Ministry has said.
In a written response to the Parliament’s Public Accounts Committee (PAC), the Revenue Department said that due to withdrawal of old high-value notes, the idle/hidden cash has come into the formal system which will be utilised for productive purposes.
“Targeted verification of suspect substantial deposits is likely to widen and deepen the tax base,” it said.It is easier to track the cash which has returned to banking channels, thus making tax evasion “more difficult”, it added, reports PTI.
Further, increased availability of funds with banks and “lowering of interest rates” are expected to enhance credit disbursal, promoting investments in productive economic activities and giving boost to growth.
The Revenue Department’s response was on the impact of demonetisation on economic growth, sources said. Regarding other implications, it said that increasing use of non-cash modes of transactions will promote transparency and have a lasting positive impact on tax collections, both direct and indirect. “Along with other measures for increasing transparency and strengthening enforcement, the demonetisation will pave the way for sustainable faster economic growth,” it said.
Meanwhile, expanding scrutiny of suspicious transactions post demonetisation, the government has begun analysing deposits in new accounts and loan repayments as well as transfers to e-wallets and advance remittance for imports during the last 10 days of deadline to turn in junked notes.
After analysing cash deposits made in bank and post office accounts during the 50-day window provided to get rid of the junked 500 and 1,000 rupee notes, authorities are now examining term deposit and loan accounts that were opened after November 8 demonetisation decision.
“Income Tax Department is already taking actions in cases where cash deposits above Rs 50,000 have been made without quoting of PAN. “The Income Tax Department is using tools and its sources to identify each of these persons and is confident that there would be a big expansion in the tax base and a quantum jump in direct tax collection,” a senior government official said, reports PTI.
A close watch has been kept on the persons making cash deposits in the last 10 days of the demonetisation scheme, e-wallets, advance remittance for imports etc, and continues to work on collecting and analysing more data regarding cash deposits, he said. The focus is also on non-cash deposits in various bank accounts by way of RTGS and other means, and would continue to share its findings with the concerned law enforcement agencies. Analysis of the deposits made, by way of cash and non-cash, in various kinds of new accounts, including term deposit accounts and loan accounts that have been opened during the period of demonetisation is being done,” he said.