In November last year, the Modi government invalidated 86% of the country’s currency overnight in a bid to crack down on black money and fake notes. Before that, Modi had opened up an amnesty scheme, allowing people to declare their illegal wealth by Sept. 30, 2016, in order to avoid legal action. By Oct. 01, Rs65,250 crore worth of black money was declared under this scheme.
Now, India’s finance minister Arun Jaitley believes that all that effort has helped tax authorities identify more taxpayers in the country.
“One message has gone out clearly as per the steps taken by the CBDT (Central Board of Direct Taxes) post demonetisation—it is no longer safe to deal with excessive cash and tax evaded money … It is absolutely clear that those who have been indulging in all these are no longer safe,” Jaitley said.
Over the past year, the CBDT—the apex authority for tax collection—collected Rs1.46 lakh crore more than the 2016 fiscal, according to the Business Standard newspaper. In 2016, India’s gross tax collection stood at Rs 14.60 lakh crore.
In his 2017 budget speech, Jaitley explained that India had a deep-seated tax evasion problem:
The number of people showing income more than Rs50 lakh in the entire country is only 1.72 lakh. We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold, and number of Indian citizens who flew abroad, either for business or tourism, is 2 crore in the year 2015. From all these figures we can conclude that we are largely a tax non-compliant society.
“We took the demonetisation decision not for some short-term windfall gain, but for a long-term structural transformation,” Modi said in an interview to the India Today magazine on Dec. 29. “The multiplier effect of introduction of money which was, till now, uselessly hoarded and stocked away as cash, into the active economic system will give the economy a further boost.”