It is the season of raids in India to unearth black money. The government’s entire effort is directed at pushing India towards a cashless economy or less cash economy. It seems a noble exercise but who allowed the political parties to receive cash donations and enjoy tax exemption?. Intentions may be bonafide but why the discreet silence over Election Commission suggestions to ban anonymous donations above 2000 to political parties?. Finance Minister Arun Jaitley has responded on record that “political parties haven’t been granted any exemption post demonetisation and the introduction of the Taxation Laws (Second Amendment) Act, 2016, which came in force on December 15, 2016. Under Section 13A of IT Act 1961, Political parties have to submit audited accounts, income and expenditure details and balance sheets”.
Like the proverbial “to be or not to be”, the question is whether there is any law to allow political parties the benefit of tax exemption?. People for long have been debating as to how to make electoral funding transparent? How to clean up the corporate funding to political parties? How to hold political parties accountable by bringing them under the RTI Act? Why not impose tax on the income of political parties above a certain limit?. When people at large are being asked to account for their 500 and 1,000 notes why treat political parties as sacred cows? Don’t they need to come clean?.
The BJP’s big talk on corruption would gain legitimacy if the party leads by example. There are 1,900 registered political parties and 400 of these have never contested any election. Parties mostly claim getting 80 to 85 percent of donations in amounts below 20,000 from individuals. The law helps them keep their names under wraps. Prime Minister Narendra Modi himself spoke on many occasions about India moving towards a cashless society where black money has no place. A very lofty vision indeed. But if the people are expected to go cashless, why not begin with political parties by directing them to not accept cash donations. This would be a much needed electoral reform. Why allow donations to political parties through anonymous and questionable sources? Surely this can end black money in elections in no time because currently under the existing law, political parties need not furnish details of donors who contribute up to 20,000 each. Why not encourage political parties like common people to use ATM cards, debit cards and PayTm etc.? The Government should take a moral ground by taking demonetisation a step forward making all donations to political parties cashless.
As we bid adieu to 2016 and welcome 2017, it is time to take stock of personalities and events that made an epoch making impact in the year to suggest where we have been and where we are heading to.
Prime Minister Narendra Damodardas Modi remains unchallenged No.1 despite complete washout of the Parliament by opposition after demonetization drive. He continues to be the epicenter of power and enjoys public support across all demographic groups, both men and women and among all age and income groups.
As prime minister of world’s largest democracy, Modi’s personal popularity remains intact. Demonetization may have caused pain, loss of jobs and resultant impact on economy, but Modi continues to be adored by poor and a majority hopes that “the bold step would remove corruption, end black money and resurrect poor and underprivileged. Only a bold PM with 56-inch chest, who is a beacon of hope can order demonetization and surgical strikes”. Little doubt that the opposition sponsored protests across the country against Modi failed to have a major impact while people stood in queues waiting for complete salvation. No doubt there were questions galore in public domain as to why only public was being asked to go cashless and disclose source of money?
Why are political parties not being asked to reveal source of funding, go cashless and do all spending through banking instruments?
Interestingly while it was Modi who stood firm as No. 1 among all personalities in India during 2016, clearly it was woman power to the fore during the year gone by as seven of the top 10 personalities who were searched for on Google in India were women. The list included Olympians P.V.Sindhu, Dipa Karmakar and Sakshi Malik. Surprisingly, after Modi it was Trump whose historic win in the US elections was second most searched personality in India on google. Yahoo India Year in Review 2016 too found PM Modi named most searched politician and Sunny Leone the most searched personality. Sunny Leone (real name Karenjit Kaur Vohra alias Karen Malhotra) is an Indian Canadian actress and former porn star.
Interestingly, among the top trending personalities on social media, a non-existent Sonam Gupta was a surprise No. 3
Non-existent Sonam Gupta
Interestingly, among the top trending personalities in India, a non-existent, Sonam Gupta, the latest social media obsession, was a surprise No. 3. What started as a joke, Sonam Gupta quickly became a household name. The phrase “Sonam Gupta Bewafa hai” (Sonam Gupta is not loyal) was first seen circulating on an old Rs 10 note. Later, it appeared on some of the new notes after demonetization. Many commercial establishments announced special discounts for all those with the name Sonam to make merry while the sun shone on Sonam Gupta.
Gymnast, Dipa Karmakar occupied the fourth spot. She made the country proud by being the first female gymnast from India to ever participate in Olympics. Though she missed the medal by a whisker, she provided Indian gymnastics, moments of glory. The 22 year young gymnast from Tripura became the toast of a cricket crazy nation by finishing fourth at Rio Olympics. She is one of the five women gymnasts who have successfully landed the Produnova, regarded as the most difficult vault currently performed in gymnastics. She won a bronze medal at Asian Gymnastics Championship, first for India. The first Indian woman gymnast to qualify for the Olympics and the first gymnast of either sex from India to qualify for Olympics since Tokyo 1964, she has been conferred the Khel Ratna.
Sakshi Malik, who won the bronze medal in the 58 kg category at the Rio Olympics, the first Indian female wrestler to win a medal at the Olympics emerged among the women achievers in 2016. The Rohtak (Haryana) girl scripted history by becoming first woman wrestler from India to win an Olympic medal in wrestling. The story of 23-year old girl from Mokhra village who began her training at the age of 12 in the region where wrestling is considered only for boys. By the age of 18, she had begun her journey for Olympics when she won bronze medal at Junior World Championship in 2010. In 2014, she won Gold medal at Dave Schultz International Wrestling Tournament. Same year she won a Silver medal in Commonwealth Games in Glasgow. Next year she won Bronze at Asian Wrestling Championship in Doha and in 2016 she won Bronze at Spanish Grand Prix.
Among other women celebrities, former beauty pageant contestant Pooja Hegde and film actress and model Disha Patani who appeared in recent movie on M.S.Dhoni, the story of cricket team captain made news. At the fag end of 2016, Karun Nair from Karnataka made history by scoring a Test triple century. Not only he entered a triple century club that was long occupied by dashing Virender Sehwag, but became the quickest to bring up a triple century, taking just three innings to reach the milestone. For Test skipper, Virat Kohli, the 2016 ended with a bang as he commented that it is “just the foundation” for the team’s future.
“It’s been a memorable 2016 for us, but it’s just the beginning. It’s not even a tiny bit of what we want to achieve”. As the year was coming to a close, India’s victory in Junior Hockey World Cup gave us something to cheer. The juniors defeated Belgium in the final and were not overawed by the pressure of playing a World Cup final. India’s win after 15 years (first was in 2001) heralds good times for Indian hockey.
Demonetisation
As far as news moments are concerned, demonetization announced in an unscheduled address by the Prime Minister on November 8, 2016 topped the charts. The announcement that currency notes of 500 and 1000 would cease to be legal tenders after midnight was the most discussed and debated news. The subsequent announcements by the Prime Minister, Modi, Fin wance Minister, Arun Jaitley and RBI made it to the top news. Trump’s historic win in the US polls and Brexit, the UK’s decision to withdraw from the European Union, were also among the most popular searches. High on the ranks was Vijay Mallya, the tycoon who owed banks over a billion dollars, who quietly left the country to settle down in UK. Quite expectedly the dramatic exit of Cyrus Mistry from Tata Group, Reliance Jio’s 4G network launch, and the introduction of GST, were the most searched events of the year.
Surgical strikes
The Indian Army’s surgical strike on terror groups across the Line of Control were also among the top 10 news moments of the year. Yahoo said that “The Unnamed Soldier” who remained perennially at the forefront of national consciousness emerged as the “personality of the year”. “From thwarting a terrorist infiltration into the Pathankot Air Force Station to facing September’s militant attack in Uri that led to a precise and surgical retaliation from India, or being in the midst of the controversy surrounding the One Rank-One Pension scheme, the soldier was in the news all year long”.
When Revenue Secretary Hasmukh Adhia admitted that the government expects the entire money in circulation in the form of currency notes of 500 and 1,000 which have been scrapped to come back to the banking system, it was clear that there would be no windfall gains for the government. Some experts had projected that a part of the demonetized currency notes of a value of 14.17 lakh crore would not return to the banking system. In its report, the State Bank of India had estimated that 2.5 lakh crore may not return to the system. It was argued that this amount could be spent on infrastructure development and pro-poor schemes. Already an estimated 14 lakh crores of banned currency has come back to banks.
There is a question mark whether black money hoarders have actually laundered their black money into white or counterfeit notes have found their way to banks? With few days left for the deadline to lapse, it appears that the banned currency deposits may swell past the 14.17 lakh crore that was actually in circulation as per RBI.
No interest: The 25 percent of the money deposited with banks would not earn any interest for next four years
It is time for the government to come out with new schemes to show that gains of demonetisation negate the cost of the whole exercise that has caused some pain to the people with the ‘bearer’ of the ‘note’ who has been promised ‘rupees’ by the RBI, finding no place to go. Despite that, the masses are endearingly bearing the pain in the hope of “Achhe din” promised by the Prime Minister Narendra Modi as faith in his leadership and commitment is still intact. Widening IT net
Little doubt the tax authorities can now trace the transactions and tax black money hoarders. It is with this motive that the government has initiated its next step. It has amended the Income- Tax Act to introduce another disclosure scheme allowing those with unaccountable money to pay 49.9 percent tax. The 25 percent of the money deposited with banks would not earn any interest for next four years. The move would be like the proverbial killing of two birds with one stone as with this, banks would get interest-free deposits while those with black money would get another opportunity to come clean.
So far so good. The big question is whether the Income Tax department is geared up for such a huge exercise or it will come a cropper as it happened in case of banks and ATMs that were not prepared to handle serpentine queues of customers. The IT department would have to gather voluminous data of large deposits in Jan Dhan, savings and current accounts in private and PSU banks.
Harried common people
I am reminded of the great poet dramatist William Shakespeare who wrote in Hamlet that “There is nothing either good or bad, but thinking makes it so.” In this the data collected from banks would not distinguish whether the 2.5 lakh had come from genuine sources or a money launderer and the taxman’s ire in the form of scrutiny, notices, calls to IT offices and resultant harassment would be for all to face.
Surely, demonetisation and the cash crunch have given a much needed push to the digital economy. Finance Minister Arun Jaitley has announced several plans to incentivise digital use of payments to make the economy less dependent on cash. The digital economy has huge benefits over cash economy as it is transparent, fast, cuts costs and helps curb black money generation. But there are challenges — and the biggest challenge is lack of digital literacy, lack of financial inclusion and cyber security threats.
Demonetisation at what cost?
Now with the RBI revising the GDP figures for financial year from projected 7.6 to 7.1 percent owing to the impact of the withdrawal of currency notes and Centre for Monitoring Indian Economy estimating cost of demonetization at a staggering 1.28 trillion, the government has to act fast to come out newer plans to reap the benefits of demonetisation. The CMIE study says that the announcement of 8 November rendering 500 and 1,000 currency notes as illegal tender would mean huge costs. “Our estimations show that the transaction cost during the 50-day window till December 30, 2016 would be 1.28 trillion. If the government succeeds in unearthing even 4 trillion unaccounted cash, then the transaction cost of this exercise would be about 26 percent. It would be over 43 percent if the unearthed cash is 3 trillion”, the study points out. Households that stand in queues to exchange their old currency notes with new ones bear 12 percent of this total cost. They stand to lose 150 billion for foregone wages during the 50-day period. Banks lose a lot more. Wage levels of bankers are much higher than that of an average person in the queue and banks suffer overheads and operational costs in terms of recalibrating ATMs. Banks would do little else during this 50-day period and we estimate that they would bear a cost of 351 billion during this period. The government and RBI are estimated to bear a cost of 168 billion. This is largely because of printing of new currency and transportation of new currency to bank branches, ATMs and post offices. Enterprise stands to pay the biggest price for this transaction, by way of loss of business.
It is time for the government to come out with new schemes to show that gains of demonetisation negate the cost of the whole exercise that has caused pain to the people seeking new banknotes
The study says that “a steady stream of news reports of empty mandis, low footfalls at malls and drop in business in restaurants, stressed factories, etc paint a grim picture of the effects of a sudden withdrawal of liquidity from markets. Trade bodies have made their estimates of loss of business. We estimate the direct impact on business in terms of the drop in discretionary spending by households”. This alone adds up to more than half a trillion rupees during the 50-day period till end of December. Enterprise stands to lose 615 billion or 48 percent of the total transaction cost of this exercise of demonetization. The study adds that “though all estimates are admittedly conservative and are limited to the 50-day window. However, the impact of low liquidity, broken supply chains and loss of confidence in consumers is likely to impact the economy over a longer period. Therefore, the transaction cost of this exercise is more than the 1.28 trillion estimated here, which is limited to only the 50-day window till 30 December 2016”.
Reaching out to people
The government and banking system needs to reach out to small business, houses, farmers who find prices of fruits and vegetables and other produce crashing. The government would have to do lot of explaining if ending terrorism and black money were the sole motives because if demonetisation alone could end terrorism, globally it could have been done. Before experts questioning the government if its math had gone horribly wrong, the government needs to come out with innovative plans to ensure that benefits of demonetisation reach the poor and there is discernible impact on economy and lives of common people.
“When beggars die there are no comets seen; the heavens themselves blaze forth the death of princes,” penned William Shakespeare in Julius Caesar. The cyclone Vardah hitting the Tamil Nadu coast on December 12, exactly a week after the death of AIADMK supremo and chief minister, J.Jayalalithaa signifies the truth contained in the prophetic lines.
Rarely one finds masses worshipping their leaders as Gods, the way Jayalalithaa, who had achieved a cult figure was deified. She had the stature, the clout and the charisma to provide purpose to the Government. The vacuum created by her death is likely to push Tamil Nadu and Dravidian politics into an era of turbulence. The question mark on every lip is what after Amma?
All through her life, she remained committed to the Dravadian values. She personified the Tamil cult as she had an inexplicable hold over the masses, especially the women. Masses saw her as “Amma”, a friend and a protector who was central to her party. Little doubt that it seems uncertain that the party without her would be able to retain its unity.
One can find murmurs on social media with rumours doing the rounds that “Chinna-Amma” Sasikala Natarajan may assume the role of new party chief. Sasikala has so far not held any post either in the government or the party. This was the strategic political arrangement Jayalalithaa had made to keep the balance of power.
However, this may not last. Failing to have her way in the chief minister’s selection, Sasikala may try to control the party as general secretary or through her own faithful.
Though elections would be due in Tamil Nadu only in 2021, but there is anxiety about whether O. Panneerselvam, who has been sworn in as Chief Minister, would be able to hold the party and government together. To party supporters, Jayalalithaa was the only leader, the legatee of MGR and in her absence, the charisma of AIADMK would be put on test.
There is a question mark over the future of so-called Dravidian parties and politics as DMK patriarch Karunanidhi too is 92 years old and in frail health. Tamil Nadu has been integral to the national mainstream, with its 39 MPs often deciding which party will rule Delhi. National parties now see huge possibilities to expand their presence in Tamil Nadu.
The political field is wide open in Tamil Nadu, the land of temples as we bid adieu to “Amma”, the leader people adored”!
In the aftermath of demonetisation, the killing of three Indian soldiers by Pakistani troops including recovery of the mutilated and beheaded body of one of the soldiers has gone almost unnoticed. It failed to elicit condemnation that the repulsive act deserved. The Pakistani soldiers had crossed the Line of Control that divides Kashmir to launch the sneak attack. On 23 November, a day after the recent incident, the country was told of a big mortar assault by the Indian Army that had been given a free hand to settle scores with Pakistan. On 29 November, seven soldiers, including two Majors, were killed when militants dressed as policemen stormed a military camp in Jammu and Kashmir.
Sadly this tit for tat and ‘an eye for an eye’ policy has been going on in body count ever since 19 Indian Army soldiers were killed in Uri in September month leading to retaliatory surgical strikes. Tensions between the nuclear-armed neighbours had been strained ever since. There have been repeated outbreaks of cross-border fire.
We can’t dispute that the mutilation of bodies of soldiers is no bravery but an act of desecration. However, as events have shown, there has been no end to the cross-border firing and post-surgical strikes, 28 Indian soldiers and several civilians have laid down their lives.
Even though the Army on 23 November undertook the biggest fire assault since 2003, there is a question mark if it will achieve the desired result of fostering peace. It is high time that India not be seen as a country trapped in this cycle of blood feud. We need to come out with a clear cut road map to restore and ensure ceasefire on the LoC.
Like TS Eliot’s The Waste Land that presented the post-war sense of desolation, disillusionment of a generation, futility and a thirst for life-giving water, the formal ceasefire in November 2003 had come
as a big boost to peace, leading to return of thousands of farmers and their families to border villages on both sides.
The present times, provide a yet another opportunity of that kind to our Prime Minister Narendra Modi who has emerged a global leader enjoying unchallenged hold over political power. It is only expected of him and the government to initiate steps to restore the ceasefire that worked well all these years barring recent hostilities between the neighbours that have so much in common. Indeed, peace is a pre-requisite for the NDA government’s promise to common people of a corruption-free society, responsive governance and resultant “Achhe din”.
First came the surgical strike on terror launch pads across the borders and now it is time for surgical strike on black money. By demonetising high-value currency notes of 500 and 1,000 as legal tender, Prime Minister Narendra Modi has struck hard at the root of the twin problem of black money and fake currency. When the Prime Minister explained the measure, pointing to the imagery of corrupt officials stashing ill-gotten money in their mattresses and cupboards, he left nothing to imagination. He made it clear that black money is not only fuelling inflation but also aiding terrorism. It seems to be a step towards a cashless economy and just the first step to curb corruption.
Modi struck an instant chord with common people, particularly the middle class, when he pointed out that it was indeed difficult for honest taxpayers to buy a dwelling unit or roof on the heads of their families because of skyrocketing real estate prices. It is no secret that the real estate sector flourishes on black money and most property transactions are with a motive to ‘adjust’ black money. Prime Minister made his intentions clear a couple of days later when he said that detractors of the demonetisation move, especially the Congress leaders who especially those involved in mega scams, are now standing in queues to exchange 4,000 and announcing that more anti-graft measures were on the anvil including action against benami property.”
“This government does not want to bother honest people but doesn’t want to spare the dishonest. Bear with me for 50 days. I am not going to stop at this. I will expose the history of corruption of 70 years since Independence,” Modi said. “This is not an end. I have more projects in mind to make India corruption-free. We will take action against benami property. This is a major step to eradicate corruption and black money. If any money was looted in India and has left Indian shores, it is our duty to find out about it,” he said in his speeches, both at Panaji (Goa) and Belagavi (Karnataka).
“I know that forces are up against me, they may not let me live, they may ruin me because their loot of 70 years is in trouble, but I am prepared. Those who were involved in the coal scam, 2G scam and other scams, now have to stand in queues to exchange 4,000.”
The rating agency CRISIL has projected India’s unaccounted money to the tune of whopping $479 billion
After the 2014 landslide electoral victory, the Modi government was under tremendous pressure because the major poll plank of the Bharatiya Janata Party during the 2014 elections was to bring black money stashed in safe havens abroad. Opposition has been chiding it to put 15 lakh in each individual’s account that it had promised during intensive campaigning in the run-up to the election. However, the BJP had been hitting back saying that Congress that ruled for donkey’s years had failed to act against black money. The sudden decision is to silence the critics and to take wind out of their sails. The aim of the bold move is also electoral reforms because black money in the form of donations often finds its way to political funding. Naturally the decision that has taken political parties unawares, would badly hit these because elections are fought with undeclared reserves of cash donations. That electoral politics is funded by businesses in return for tax concessions and favourable policy decisions is well known.
Spurt in foreign remittances before demonetisation
Deprived suddenly of unaccounted poll money, political parties may still willingly back this much-needed electoral reform because of obvious reasons. However, the opposition has alleged that this was a well planned structured money laundering that was carried out before banning 500 and 1,000 currency notes. The RBI had come out with a liberalised remittance scheme in 2015 allowing individual Indians to transfer upto $250,000 (close to 2 crore) in their overseas accounts in a financial year. Earlier, the LRS limit was just $75,000. The RBI first increased LRS slab to $125,000 on June 3, 2014 and again it was increased to $250,000 on 26 May 2015.
Following this, Indians have sent a record amount overseas under a facility that allows them to send money abroad either as a gift or maintenance of relatives, even investments abroad or purchase of property without any questions asked. Outward overseas remittances under the facility are called liberalised remittances scheme (LRS) which allow residents to remit overseas $250,000 a year. It touched a record $ 4.6 billion up from $ 1.6 billion a year ago. An analysis of monthly trend in such remittances shows that there was a sudden spurt in remittances from June 2015 onwards from a little over $100 million a month to more than $400 million a month.
“In one day our savings deposits have gone up by Rs 11,000 crore. Normally, deposits go up by about Rs 8,000 crore per month. Our current account deposit has
gone up by 7,000 crore in one day”.
Arundhati Bhattacharya
CMD State Bank of India
Already many political parties have shown unhappiness with the decision. While Congress Vice-President, Rahul Gandhi has said that real black money is stashed abroad, West Bengal Chief Minister Mamata Banerjee has described it as “draconian move”. Bahujan Samaj Party supremo and former chief minister of Uttar Pradesh said that the Modi government has created an Emergency-like situation while former chief minister Mulayam Singh Yadav wanted government to at least allow a week’s time to implement the decision so that the poor did not suffer. Delhi Chief Minister and Aam Aadmi Party Chief, Arvind Kejriwal criticised the move ,alleging that friends of BJP had been informed of the move at least a week in advance.
Money talks: Finance Minister Arun Jaitley explains the finer points of the policy
The enormity of the black money could be understood from the World Bank estimate that India’s shadow economy is close to 23.2 percent of Gross Domestic Product. The rating agency CRISIL has projected India’s unaccounted money to the tune of whopping $479 billion. In fact ,in just couple of days after the demonetizstion, the State Bank of India collected around 38,677 crore in deposits. The total deposit collection by all the commercial banks would have crossed 1 lakh crore mark in the first two days.
“This won’t curb black money. The BJP and its friends were informed about the demonetisation of high value currency a week before the move was put in place”.
Arvind Kejriwal
Delhi CM & AAP Chief
There was added pressure on the government after the release of documents earlier this year naming companies and individuals who had set up offshore shell companies and accounts through brokers based in Panama. This all had been revealed in ‘Panama Papers’. Also, the last amnesty scheme the government launched this year had not yielded much and was a partial success. The government could earn less than 30,000 crore at the closure of Income Disclosure Scheme (IDS). Only an amount of 65,250 crore worth black money was disclosed by 64,275 declarations (average 1 crore each filing) in the form of cash and other assets during the four-month window that ended in September.
The government was working on shock therapy and the surprise move was well-planned and kept a closely guarded secret. The introduction of new 500 and 2,000 notes, the government argues, would not only check counterfeit currency, a problem that has assumed serious dimensions, but also purge India’s economy of the black wealth amassed in the form of high-value notes. The agencies would monitor cash deposits above 2.5 lakh and has threatened to levy 200 percent penalty on tax evaders. Any decision like this needs to be sudden, and it is not surprising that it has caused hardship as people line up in long queues to get notes of smaller denomination for daily expenditure. There will be multiple effects on the economy —how they all add up will be clear in the months to come. The use of plastic money and paperless transactions may pick up further.
Demonetisation a masterstroke: CII
Industry body Confederation of Indian Industry has fully supported the government move. Reacting to the move, it said that demonetising high denomination notes is likely to have far-reaching impacts , striking a blow at the heart of the illegal economy. While it is not possible to have a firm estimate of unaccounted wealth, it is widely estimated at around a fifth of India’s GDP or around $450 billion. While some of this may be stored in cash, some may be in assets such as real estate and jewellery. This negatively affects the business environment, especially for those who comply with the law of the land and follow ethical practices, Confederation of Indian Industry has observed.
“After a short period of some pain when the economy adjusts to the sudden withdrawal of cash, CII expects a much stronger economy. India’s cash-dependence is extremely high with a currency-GDP ratio of around 12 percent compared to 4-5 percent in other developing countries. High level of cash usage tends to slow down the flow of money through the economy. Spending will rise, leading to additional economic growth. This is an economic masterstroke by the Prime Minister and must be allowed time to play out,” said Chandrajit Banerjee, Director General, CII. The prevalence of cash use has also made India prone to high inflation. Corruption and excessive cash use tends to erode the purchasing power of money. Lower cash use will have a dampening impact on inflation and this will be a further positive for India’s macro-fundamentals. “The Reserve Bank will now have more room to cut interest rates as inflation subsides. Already, the bond market has reacted to the news with a reduction in the bond yields,” Banerjee observed.
“The PM could not get back the promised black money from abroad from the rich so a drama to divert his failure. A financial chaos and disaster let loose on common people.
Mamata Banerjee
West Bengal CM
The CII further elaborated, that this move will be positive for banks whose deposit mobilisation will be strengthened. The old currency notes will be deposited with banks and more households will find it imperative to open bank accounts and make use of card payments. Currency in the form of 1,000 and 500 notes amounted to 14.2 lakh crore as of March 2016, or about 85 percent of total currency in circulation. If this is converted to current and savings deposits, there will be an increase in banks’ liquidity. This is also a great opportunity to transition to a “plastic economy”.
CII has stated that in all likelihood, a fair proportion of the 14 lakh crore in high-denomination currency will not return to the banking system, for fear of accounts being scrutinised. If one assumes that about 20 per cent of the cash does not return to the system, this would amount to about 3 lakh crore or $42 billion. This is a reduction in the RBI’s liability to the public, allowing it to print a similar amount of fresh money or transfer the gain to the government.
“The biggest gain from this move will be greater formalisation of the economy. Currently, the costs of informality are evident in low tax base which impacts government revenues, lack of economic control through monetary instruments, and lower economies of scale. India’s tax base is low and its tax-to-GDP ratio needs to increase from the current level of 16.6 percent, which is much lower than about 21 percent in other emerging economies. Less than 30 million Indians filed personal income tax with more than half of these paying no tax”.
What action for above 2.5 lakh deposits
People are rushing to banks to deposit large sums. They should now be prepared to receive income tax notices. While depositing the unaccounted cash into his bank account or exchanging everyone will have to submit his PAN and Aadhar Card etc to the banking officials. This would make the likelihood of his case being detected by the Income Tax Department very high. Any amount above 2.5 lakh deposited and found not in consonance with the declared income would get notices from the income tax department asking for the source of this amount. Notice could be issued under Section 142(1) asking depositor to furnish the Income Tax Return within a specified time frame. This notice will ask for information relating to three years immediately preceding the financial year for which assessment is to be made. Generally this notice would come with a notice under section 144, 148 or 153A. If the depositor does not comply with the directions, conditions specified in the notice, then he might have to face best judgement assessment under Section 144. This means that the Income Tax office will assess your income and impose tax and penalty as per its own judgement. Also, in this case there would not be any further opportunity. Apart from other penalties, one might end up in prison for up to one year.
“Those who have lawful money need not worry. The decision would instill fear only in the minds of the corrupt. It is a great decision and it pays to be honest.”
Arun Jaitley
Finance Minister
Will the move succeed?
However, the hardliners say that demonetisation of 500 and 1,000 banknotes is unlikely to help the government extract black money from the system as hoarders keep a tiny portion of their ill-gotten wealth in hard cash. Cash recovery has been less than 6% of the undisclosed income seized from tax evaders according to tax officials. In income-tax raids from 1 April to 31 October this financial year, black money holders accepted having stashed 7,700 crore worth of ill-gotten assets. The cash component was merely 408 crore or 5 percent. The remaining was invested in business, stocks, real estate and benami bank accounts.
Longer queues, shorter tempers
Public inconvenience in the form of long queues at banks and post offices is there for everyone to see and feel. However, it should be tolerated in national interest. Fake currency, terror and drug trade go hand in hand and are the enemy’s known tools to cause damage to the country. Within the country, black money has inflated home prices to levels beyond the reach of ordinary people. Now demand may cool and prices fall. Ostentatious consumption will also take a hit. While there will be pain and confusion in the short term for common people and the economy, a disruptive measure was perhaps the only way to shake up the system to a new compliance normal.
But the Centre must ensure that no poor person is saddled with old, useless notes due to the lack of official identity documents or a bank account, and avoid putting to disadvantage older citizens unable to visit a bank repeatedly to exchange high-value notes. It should find ways to check black money parked in ‘benami’ properties. There must also be administrative and electoral reforms to advance digital payments and eliminate the prospect of the new currency regime spawning the ghost economy afresh. With new 500 and 2,000 notes in circulation, black money may return with time, unless the problem of generation is dealt with.
All said and done, this is a historic move because Modi has become the second Prime Minister after Morari Desai to take the bold, high-risk step, which is expected to hit the BJP’s core constituency of businessmen and traders. The loss may be more than offset by new admirers Modi will get.
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‘Existing series will cease to be legal tender’ status
Here’s how the Reserve Bank of India spelt out the government’s surprise move that dealt a death blow to stacks of notes tucked away to conceal income and evade tax:
This is the RBI notification sent to all chairmen, managing directors, chief executive officers of public sector, private sector, foreign banks, rural banbks, urban and state cooperative banks
In terms of Gazette Notification 2652 of November 8, 2016 issued by Government of India, 500 and 1,000
denominations of Bank Notes of the existing series issued by Reserve Bank of India (hereinafter referred to as Specified Bank Notes) shall cease to be legal tender with effect from 9th November, 2016, to the extent specified in the Notification. A new series of Bank Notes called Mahatma Gandhi (New) Series having different size and design, highlighting the cultural heritage and scientific achievements of the country, will be issued. Bank branches will be the primary agencies through which the members of public and other entities will be exchanging the Specified Bank Notes for Bank Notes in other valid denominations or depositing the Specified Bank Notes for crediting to their accounts, upto and including the December 30, 2016. Therefore, banks have to accord highest priority to this work.
In order to enable the members of public and other entities to exchange their existing 500/- and 1,000/- notes, the following arrangements have to be made by the banks.
RBI has opened a Control Room at its Central Office for monitoring the progress and providing guidance to banks, public
2. Action to be taken on November 09, 2016
i) November 09, 2016 (Wednesday) shall be a non-business working day for all banks. However, branches will function on that day to carry out preparations for implementing the scheme as per this circular.
ii) The Specified Bank Notes stocked in ATMs, Cash Deposit Machines, Cash Recyclers, Coin Vending
Machines, any other cash dispensing/receiving machine, CIT Companies and Business Correspondents attached to the branch will have to be called back forthwith. The sponsor banks of White Label ATMs will be responsible for recalling the Specified Bank Notes from the White Label ATMs sponsored by them.
iii) Banks should take steps to stop issuing Specified Bank Notes through their branches, business correspondents from November 9, 2016.
iv) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash shall be shut on 9th and 10th November, 2016.
v) All ATMs and cash dispensing machines will have to be re-configured to disburse bank notes of
100/- and 50/- denominations prior to reactivation of the machines on 11th November, 2016; however banks should await separate instructions from Reserve Bank of India on issuing Mahatma Gandhi (New) series Notes through ATMs and cash dispensing machines though they can be issued over the counters from Nov 9, 2016.
vi) Every banking company defined under the Banking Regulation Act, 1949 and every Treasury shall complete and forward a return in the format showing the details of the Specified Bank Notes held by it at the close of business as on 8th November 2016, not later than 13:00 hrs on November 10, 2016 to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Head office of the bank is located. The return should also include details of Specified Bank Notes recalled from ATMs, Cash Deposit Machines, Cash Recyclers, Coin Vending Machines, CIT Companies, Business Correspondents, etc.
vii) Arrangement should be made by the branches to promptly deposit these Specified Bank Notes with the linked currency chest / RBI and get the amount credited to their account.
viii) Branches should estimate their cash requirement and obtain from the linked / nearby currency chest /RBI Bank Notes of other valid denominations.
ix) Cash Deposits machines / Cash Recyclers should continue to accept Specified Bank Notes upto December 30, 2016.
3. Action to be taken on November 10, 2016
a. Bank branches will commence normal operations on November 10, 2016.
b. Banks have to accord top priority to provide facility for exchanging / accepting deposits of Specified Bank Notes and open additional counters to meet the public demand and keep the counters open for extended hours, if necessary. Maximum staff should be deployed for this purpose. If necessary banks may consider hiring retired employees for a temporary period to take care of additional work load.
c. Provision of Exchange Facility:
The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks, Regional Rural Banks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 30th December, 2016, subject to the following conditions, namely:—
(i) the specified bank notes of aggregate value of 4,000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity; the limit of 4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this notification and appropriate orders may be issued, where necessary;
(iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where the specified bank notes are tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be 50,000.
(x) Business Correspondents (BCs) may also be allowed to exchange Specified Bank Notes upto 4000/- per person as in the case of bank branches, against valid identity proof and requisition slip. For this purpose banks may, at their discretion, enhance the cash holding limits of BCs at least till December 30, 2016.
4. Reporting Mechanism
Each bank branch exchanging Bank Notes in the denominations of 500/- and 1,000/- shall report at the close of business on each day starting from 10 November 10 till the closure of the scheme on December 30 (or till any other date thereafter as may be advised by RBI) by email or Fax to their Controlling Office a statement showing the details of Specified Bank Notes exchanged by it and the respective Controlling Offices will aggregate these and report to the Department of Currency Management, RBI, Central Office on a daily basis.
5. Banks may issue detailed instructions to their branches advising them to strictly adhere to the norms of the scheme and procedures laid down above. The staff at the branch level, particularly the tellers, should be adequately sensitized.
6. Banks should make copies of information material and distribute these to the public.
7. Bank should issue instructions to BCs, ATM Switch Operators and CIT Companies on various aspects of the above scheme relevant to them.
8. Banks should monitor the implementation of the scheme on a day to day basis through a monitoring cell headed by an Officer not below the rank of a General Manager, who will act as a Nodal Officer. The Contact details of the Nodal officer will be reported to the concerned Regional Office of RBI, with a copy
to RBI Central Office, Mumbai through email.
9. RBI has opened a Control Room at its Central Office for monitoring the progress and providing guidance to banks and members of public.
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No 200% penalty on cash deposits
Mohit Gupta is a renowned Delhi-based chartered accountant. The views expressed are personal
The demonetisation of 500 and 1,000 rupee banknotes is a step taken by the Government of India to fight corruption and black money issues in the country. Starting from 9th November 2016, al 500 and 1,000 rupee notes ceased to be accepted as a form of legal tender in India. The announcement was made by the Prime Minister of India, Sh. Narendra Modi in a live televised address to the nation at 8:15 pm on
8 November 2016. In the announcement, Modi declared circulation of al 500 and 1,000 rupee banknotes of the Mahatma Gandhi series as invalid and announced the issuance of 500 and 2,000 rupee banknotes in the new Mahatma Gandhi series in exchange for the old banknotes.
The demonetisation was done in an effort to stop the counterfeiting of the current banknotes alleged to be used for funding terrorism and for cracking down on black money in the country. Following the announcement by the Prime Minister, the RBI Governor issued a press release with details on the procedure for exchanging/depositing the 500 and 1,000 rupee notes that are currently in circulation and the procedure for demonetisation.
Previously, similar measures were taken. In January 1946, currency notes of 1,000 and 10,000 rupees were withdrawn and new notes of 1,000, 5000 and 10,000 rupees were reintroduced in 1954. The Janata Party coalition government had again demonetised notes of 1,000, 5000 and 10,000 rupees on 16 January 1978 as a means to curb forgery and black money.
Imposition of penalty
The demonetisation of Indian High Value Currency Notes is creating havoc and sheer chaos in the
Indian Markets. Amidst such a scenario, rumours are spreading throughout about the taxability of the
unaccounted cash which will be deposited in the bank accounts.
We are going through an outburst of messages and posts on social media and print media which range from the scary to the alarmist on the topic of demonetization of the 500 and 1,000 notes. There are some things the media just doesn’t understand. In fact, here social media warriors must also take the blame for spreading grossly exaggerated news. Most particularly about the media posts and reports wherein they are spreading the rumours of imposition of 200 percent penalty by the Income Tax Department on the cash deposited in banks by the assessee. It has been rumoured and spread vigorously that the 200 percent penalty shall be imposed on the cash deposits in the bank accounts, thus you need to pay more than your income! This kind of unwarranted interpretations has led to sheer panic among the Indian masses. It is very pertinent to mention here is that the intent of this demonetisation scheme is to clear up the menace of black money from the economy which in turn will be used for the development of nation and Indian masses.
Due to such rumours of taxability ( along with the penalty) of amount even more than deposits, people are resorting to alleged illegal and unfair means in the garb of conversion which should strictly be discouraged immediately and controlled with force. The need of the hour is to acknowledge this wonderful demonetisation scheme and be a stakeholder in the development of the nation. So, deposit the unaccounted wealth in your accounts, pay taxes (incl. advance tax on the same), be a catalyst in this
noble cause for cleaning our own country and taking it towards glory.
Let’s us examine the taxability of the unaccounted cash deposits in bank accounts.Brevity may be the soul of wit, but unfortunately, not of The Income Tax Act, 1961. It is very pertinent to mention here is that The Revenue Secretary has said (rather, tweeted) four very important statements, which are to be analyzed both logically and legally keeping in view the relevant sections of the Income Tax Act’1961.
The first statement is as follows.
1. “We would be getting reports of all cash deposited during 10 November to 30 December 2016 above threshold of 2.5 lac in each A/C.”
Now, the first tweet talks about a 2.5 Lakh threshold. This is not an arbitrary number. It is the maximum
exemption limit for income tax for individuals. Basically, you are not liable to pay the tax if your annual earnings are below 2.5 Lakhs. So if you’re a non-earning member who has saved money, you can deposit your savings of up to 2.5 lakhs without wondering if you’ll be pulled up by the tax authorities for having money in your account, out of the blue. If you’re a senior citizen over the age of 60, the limit goes up to
3 lakhs, and if you’re a super senior citizen over the age of 80, 5 Lakhs.Next, he talks about ‘getting reports’. The fact is that the government and Revenue Department had been keeping track of high value cash deposits for a few years now. If you have seen your tax credit statement, the 26 AS, there is a section called “Annual Information Return”, where banks are mandatorily required to furnish information about high value transactions that are linked with your PAN. So keeping track of your cash deposits (especially high value deposits) is not something novel that the government is going to do now that the demonetisation has been announced.
Under 270A, the penalty can only be levied on difference between assessed income and returned income
But what about the tweets where he talks about income tax action and 200 percent penalty?
This is what his other three tweets said:
2. “Income Tax department would do matching of this with income returns filled by the depositors. And suitable action may follow.”
3. “If cash amount of above Rs10 lac is deposited in a bank a/c not matching with declared income, same will be treated as tax evasion”
4. “In such case, tax amount plus a penalty of 200 percent of the tax payable would be levied as per
Section 2 70(A) of the income tax Act”
Let us go through the new penalty regime (inserted by the Finance Act’2016) to have a crystal clarity on the issue of imposition of penalty particularly in case of cash deposits of the demonetized currency in the bank accounts over and above the cash available in the books of accounts as on 08-11-2016.
The levy of penalty for concealment or furnishing of inaccurate particulars of income under the erstwhile provisions of Section 271(1)(c) of Income-tax Act 1961 has always been a matter of litigation between the revenue authorities and the taxpayers. The scope of such provisions was always been a subject matter of litigation since tax authorities always levied the penalty whenever there was an addition or disallowance made by the assessing officer, may be because of pressure of higher authorities, even in cases where there was no prima facie case against the taxpayer. With a view to reduce the litigation and remove the discretion of tax authority, the Finance Act, 2016, w.e.f 01-04-2017 has inserted new provisions in the form of new Sections 270A and 270AA in the Act which replaced the existing provisions of section 271(1)(c). Imposition of penalty under sections 270A and 270AA will apply to cases pertaining to A.Yrs. 2017-18 onwards and provisions of section 271(1)(c) will continue to be applicable to all cases up to A.Yrs. 2016-17.
Under the new scheme, the penalty maters are categorised in two parts — (1) under reporting of
income and (2) misreporting of income. Under reported income has been defined in S. 270A(2) which is to be read with sub-section (6) while misreporting of income is defined in sub sections (8) & (9) of this
section. Seeking to remove the discretion of the Assessing Officer, Section 270A imposed fixed percentage of the amount of penalty under the new scheme. Hence, penalty for under reported income will be at fixed rate of 50 percent of the tax payable on unreported income while it will be @ 200 percent of the tax payable on the misreported income as against 100 percent to 300 percent of concealed
income under the erstwhile provisions of section 271 (now applicable for A.Y. 2016-17 and earlier assessment years).
The provisions of Section 270A of the Income Tax Act’1961 are reproduced herein under:
“Penalty for under-reporting and misreporting of income.
270A. (1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.
(2) A person shall be considered to have under-reported his income, if:
(a) the income assessed is greater than the income determined in the return processed under clause
(a) of sub-section (1) of section 143;
(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished;
(c) the income reassessed is greater than the
income assessed or reassessed immediately before such reassessment;
(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the
return processed under clause (a) of sub-section (1) of section 143;
(e) the amount of deemed total income assessed as per the provisions of section 115JB or section
1 15JC is greater than the maximum amount not chargeable to tax, where no return of income has
been filed;
(f) the amount of deemed total income reassessed as per the provisions of section 1 15JB or section 1 15JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment;
(g) the income assessed or reassessed has the effect of reducing the loss or converting such loss
into income.
(3) The amount of under-reported income shall be,— (i) in a case where income has been assessed for the first time:
(a) if return has been furnished, the difference between the amount of income assessed and the amount of income determined under clause (a) of sub-section (1) of section 143;
(b) in a case where no return has been furnished:
(A) the amount of income assessed, in the case of a company, firm or local authority; and
(B) the difference between the amount of income assessed and the maximum amount not chargeable to tax, in a case not covered in item (A);
(i) in any other case, the difference between the amount of income reassessed or recomputed and the amount of income assessed, reassessed or recomputed in a preceding order:
Provided that where under-reported income arises out of determination of deemed total income in
accordance with the provisions of section 11 5JB or
section 1 15JC, the amount of total under-reported
income shall be determined in accordance with the following formula:
(A — B) + (C — D) where,
A = the total income assessed as per the provisions other than the provisions contained in section
1 15JB or section 1 15JC (herein called general provisions);
B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of under-
reported income;
C = the total income assessed as per the provisions contained in section 115JB or section 115JC;
D = the total income that would have been
chargeable had the total income assessed as per
the provisions contained in section 115JB or section 115JC being reduced by the amount of under-
reported income:
Provided further that where the amount of under-reported income on any issue is considered both
under the provisions contained in section 1 15JB or section 1 15JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.
Explanation—For the purposes of this section:
(a) “Preceding order” means an order immediately preceding the order during the course of which the penalty under sub-section (1) has been initiated;
(b) In a case where an assessment or reassessment has the effect of reducing the loss declared in the
return or converting that loss into income, the amount of
under-reported income shall be the difference between the loss claimed and the income or loss, as the case may be, assessed or reassessed.
(4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt,
deposit or investment appears (hereinafter referred to as “preceding year”) and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to cover such
receipt, deposit or investment.
(5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported for the preceding year in the following order:
(a) The preceding year immediately before the year in which the receipt, deposit or investment appears,
being the first preceding year; and
(b) Where the amount added or deducted in the first preceding year is not sufficient to cover the receipt,
deposit or investment, the year immediately preceding the first preceding year and so on.
(6) The under-reported income, for the purposes of this section, shall not include the following, namely:
(a) the amount of income in respect of which the
assessee offers an explanation and the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered;
(b) the amount of under-reported income determined on the basis of an estimate, if the accounts are corect and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;
(c) the amount of under-reported income determined on the basis of an estimate, if the assessee has,
on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance;
(d) the amount of under-reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and
(e) the amount of undisclosed income referred to in section 271AAB.
(7) The penalty referred to in sub-section (1) shall be a sum equal to fifty per cent of the amount of tax payable on under-reported income.
(8) Notwithstanding anything contained in sub-section (6) or sub-section (7), where under-reported income is in consequence of any misreporting thereof by any person, the penalty referred to in sub-section (1) shall be equal to two hundred per cent of the amount of tax payable on under-reported income.
(9) The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:
(a) misrepresentation or suppression of facts;
(b) failure to record investments in the books of account;
(c) claim of expenditure not substantiated by any evidence;
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing on total income; and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.
(10) The tax payable in respect of the under-reported income shall be:
(a) where no return of income has been furnished and the income has been assessed for the first
time, the amount of tax calculated on the under-
reported income as increased by the maximum amount not chargeable to tax as if it were the total income;
(b) where the total income determined under clause (a) of sub-section (1) of section 143 or assessed, reassessed or recomputed in a preceding order is a loss, the amount of tax calculated on the under-reported income as if it were the total income;
(c) in any other case determined in accordance with the formula: (X- Y) where,
X = the amount of tax calculated on the under-reported income as increased by the total income
determined under clause (a) of sub-section (1) of section 143 or total
income assessed, reassessed or recomputed in a preceding order as if it were the total income; and
Y = the amount of tax calculated on the total income determined under clause (a) of sub-section (1) of section 143 or total income assessed, reassessed or recomputed in a preceding order.
(11) No addition or disallowance of an amount shall form the basis for imposition of penalty, if such addition or disallowance has formed the basis of imposition of penalty in the case of the person for the same or any other assessment year.
(12) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the Assessing Officer, the Commissioner (Appeals), the Commissioner or the Principal Commissioner, as the case may be.
The bare reading of Section 270 A divulges the fact the penalty under the newly inserted section 270A (be it 50 percent or 200 percent) can only be levied on difference between assessed income and returned
income. Therefore, if unaccounted cash is deposited into bank and applicable tax (maximum 30 percent plus surcharge/Cess) is paid on this additional income, no penalty for under reporting or misreporting can be imposed by assessing officer u/s 270A of Income tax Act. This is because penalty for concealment can be levied only on difference between assessed income and returned income. So in my considered opinion, as rumoured, penalty of 200 percent under no circumstances can be levied on such income disclosed in return of current year with due payment of taxes on the same.
If, however, the case is such that you have intentionally suppressed facts, deposited the unaccounted cash and didn’t declare the same in your return of income u/s 139 of the act, than surely it is a fit case for imposition on penalty u/s 270A of the act.
Let us illustrate the aforementioned contention –
If an assessee deposits 1 crore, unaccounted cash, in its bank account, show it in its income tax return for the FY 2016-17, and pay tax on its income as per applicable slab tax rate, there can’t be any imposition of penalty, because it is not misreported or underreported income. The tax authorities will see that the assessee have declared it and paid tax on it, thus making the deposit a legitimate credit.
If, on the other hand, the assessee deposits this 1 crore in its bank account, omit it from its declaration of income (and therefore not pay any tax on it), it will be considered misreported income, and it shall be a fit case for imposition of penalty u/s 270A of the act.
To conclude, the demonetization of INR 500 and INR 1,000 currency notes is a positive, historic and game-changing move for the Indian economy and also a good lesson to those who are playing with Indian taxation policy so far. It’s now or never!!!! Come clean not only by words but also by action and be a catalyst in this noble cause of cleaning our own country and taking it towards glory.
The surgical strike on black money following Prime Minister’s announcement nullifying 500 and 1,000 notes has been received gleefully and common people are cheering the move, but many leaders are complaining. Some leaders have even sought inquiry into allegations that ruling Bharatiya Janata Party had prior information as there was surge in transactions in bullion, foreign exchange and securities prior to demonetisation. Little doubt that the Narendra Modi -led government would have to brace for a stormy winter. However, the government must keep in mind that if winter comes can spring be far behind?
Going by long queues outside banks, at ATMs and protests across the country, it appears that neither the Finance Ministry nor the Reserve Bank of India had an inkling of the nightmare that was to follow. Similarly, the people had not prepared themselves for the inconveniences unfolding day after day since the “surgical strike” on black money. The need for usable currency for daily necessities continues asserting unabated with many raising noise over the mayhem at financial institutions.
The sudden withdrawal of about 85 percent of the currency has created problems, some perhaps avoidable, which has invited the political attention of leaders like Rahul Gandhi, Arvind Kejriwal, Mayawati, Mulayam Singh Yadav, Mamta Banerjee and her bête noire Sitaram Yechury. However, the anti-corruption crusader, Anna Hazare, has supported the Modi government move and so have chief ministers of Bihar and Odisha, Nitish Kumar and Naveen Patnaik. Besides Modi, Finance Minister, Arun Jaitley and BJP chief Amit Shah have tried to silence critics. However, political rhetoric is the least one can expect in such situations when elections in many states are round the corner. But by and large, people have heeded Modi’s call to be patient for 50 days. Also all credit to bank employees who rose to the occasion at a time when the nation wanted them the most.
It is natural to question whether the government could have handled the switchover in a more organised manner. Many ATMs were shut as these had not been calibrated to handle the new currency notes. Small businesses, especially those that deal with perishable goods like milk and vegetables, rickshaw-pullers and daily-wage labourers are the ones who feel the real pain. Rural areas, ill-served by banks and ATMs, are facing the brunt of the shortage of cash for their daily needs. Left to fend for themselves, these sections are at a huge disadvantage. Had the Modi government done a little more homework for these sections, the move would have won hands down!
Battling bias: PM Modi posing with Dalit entreprenuers after an interaction with them (file pic, 2015)
Business has so far been almost unfamiliar territory for Dalits. Different political parties have for ages been luring Dalits with reservation in jobs for vote bank politics. However, Prime Minister, Narendra Modi has gone a step further by offering preferential treatment and special incentives to Dalits for promotion of businesses. The announcement by the Prime Minister at Ludhiana, Punjab, the other day and help to Dalit entrepreneurs may be a welcome move, but when we correlate it with the forthcoming elections in Punjab and Uttar Pradesh, one can read between the lines that the newborn love for this segment is a clever move to woo Dalit voters.
Unwittingly, over the years, the Bharatiya Janata Party had created an anti-Dalit perception after the Dadri, Hyderabad, Dadri, Una and Mewat incidents. Even otherwise, the BJP’s obsession with ‘Hindutva’ agenda had long been well known.Punjab has a 31.94 percent Dalit population, which was reason enough to hold the PM’s function in the poll-bound state. The event offered Narendra Modi an opportunity to attempt a Dalit outreach. Modi engaged his audience when he said that “My Dalit brothers and sisters should not stand in queue to seek jobs, instead they should give jobs to others,” he said, adding that his “head hangs in shame” over atrocities on Dalits.
According to the last census, four states account for nearly half of the country’s Dalit population. Uttar Pradesh stands first with 20.5 percent of the total scheduled caste population, followed by West Bengal with 10.7 percent, Bihar with 8.2 percent and Tamil Nadu with 7.2 percent rank third and fourth. Scheduled Castes form around 16.6 percent of India’s population while Scheduled Tribes number is 8.6 per cent of total population.
The 2011 census recorded nearly 20.14 crore people belonging to various Scheduled Castes in the country. As per the 2001 census, the number was 16.66 crore. The Dalit population showed a growth of 20.8 percent, whereas India’s population grew 17.7 percent during the same period. The growth in Scheduled Caste population was 20.8 per cent while that of Scheduled Tribes was 23.7 percent. Though UP has the largest chunk of the total SC population, Punjab has the largest share of Dalits in its population at 31.9 percent. Himachal Pradesh and West Bengal follow Punjab with 25.2 percent and 23.5 percent. In Tamil Nadu, Dalits account for about 18 percent of the population. Lakshadweep has the highest proportion of Scheduled Tribes at 94.8 per cent of its total population.
Uttar Pradesh seems most important to BJP among all other states going to poll in 2017. A win in this state would boost BJP’s strength in the Rajya Sabha where key legislation have often been stalled by opposition. However, Modi faces a tough challenge to woo Dalit voters in this state where caste is the most important factor for voters. The reasons are varied. Firstly, the four-time former chief minister Mayawati considered as most powerful Dalit politician is making a desperate bid to wrest power. And secondly, the projection of the BJP as a party of upper-castes, elite and Hindu hardliners has caused image problems for Modi. These segments of BJP have been frequently attacking Muslims and Dalits. In Modi’s home state of Gujarat, a video of Dalits being beaten for skinning a dead cow, has gone viral. Poor Dalits earn a living by selling the carcass of dead animals. Naturally, as was expected, the attacks prompted widespread Dalit protests. With the BJP on the back foot, Modi himself had to clarify: “If you want to attack, attack me, not Dalits.” The BJP president Amit Shah too swung into action and sat cross-legged on the ground and shared food with Dalit families. Taking a cue, the party lionised the legacy of former Dalit leader B.R. Ambedkar.
What could be a cause of worry for the BJP could be that after the party government took the reins in 2014, there were 44,941 attacks against Dalits in the following year (2015) as per the data compiled by the National Crime Records Bureau. In Uttar Pradesh, there were 8,358 attacks against Dalits, up from 8,075 in 2014 during 2015. According to a report by the National Human Rights Commission, a crime is committed against a Dalit in India every 18 minutes. Sadly, each day three Dalit women are raped and as many murdered.
The data suggests that Dalits are not allowed to enter police stations in 30 percent of villages and in 35 percent government schools Dalit children are still asked to sit separately. Ironically as per a report of National Commission for Scheduled Castes, Modi’s home state Gujarat reported the highest crime rate against Dalits followed by Chhatisgarh and Rajasthan in the year 2015.
Alarmed, the BJP-led government at the Centre brought new legislation. The Parliament passed SC and ST Prevention of Atrocities Amendment Bill in December 2015 to curb crime against Dalits and to enable entry into all places of worship, education or health institutions. However, this has failed to check or arrest crime against Dalits. Some change is taking place, particularly in urban areas, where economic parameters matter more than caste order or where social movements against untouchability have brought a sea change in perceptions. However, Dalits are watching with dismay the hollowness of current hyper-nationalism or jingoism.
Conscious of this hard reality, the BJP celebrated Prime Minister Narendra Modi’s birthday recently as ‘Sewa Diwas’ (day of service) across the country aimed at wooing Dalits votes ahead of the 2017 Assembly polls. The ‘Sewa Diwas’ is the beginning of a series of programmes the party plans to organize to wrest the Dalit votes from the Congress and the Bahujan Samaj Party. How BJP has gone into overdrive could be understood from the fact that it has converted Dr BR Ambedkar House in London into a memorial. At a recent meeting of RSS at Nagpur, a large statue of Dr Ambedkar adorned the dias. The party is finding new strategies to woo Dalits.
The party think tank has suggested taking Dalits to their pilgrimage places on the lines of Punjab Chief Ministers’ Tirath Yatra Scheme. So much so that BJP chief Amit Shah took a dip in Narmada river with Dalit saints in Ujjain. The BJP has also come out with a social campaign named “Vichaar Kumbha” involving Dalits to have a dialogue with people from upper castes in slums and villages. The party has organised Dhamma Yatras in Dalit hamlets. The idea is to strengthen its roots with Dalits to reap political benefits in the forthcoming elections.
Now at a time when the BJP has gone into overdrive to woo Dalit voters, the Shakespearean Hamlet like dilemma for the party “To be or not to be” continues as a section is of the view that this could alienate upper-castes, elite and Hindu hardliners who have traditionally been its core strength.
Salil Chaturvedi, the award winning writer and disability campaigner was thrashed by the couple seated behind him in the Panaji multiplex
The recent assault on Salil Chaturvedi, a celebrated poet, author and disability activist, by a bellicose couple for not standing up when the national anthem was being played at a cinema hall in Goa is an example as to how far we are stretching nationalism to make it jingoism! Salil apparently could not stand because of the disability caused by a spine injury. Son of a former Air Force officer, Salil Chaturvedi represented the nation in wheelchair tennis at Australian Open. As for his patriotic credentials, he was part of the cast of children’s television show “Galli Galli Sim Sim”, the Indian version of Sesame Street. He had compiled the first Konkani audio book for blind children. The award-winning writer and disability campaigner was thrashed by the couple seated behind him in the Panaji multiplex. Chaturvedi reportedly reacted “Are cinema halls a place for us to express love for the country? Are we not belittling the national anthem by playing it in movie theatres? Don’t people who are drunk come to watch movies? Who is someone to judge how much I love my country?”
This is not an isolated case of jingoism that the country is going through following the Uri attack and surgical strikes. Jingoism is spreading its scope. Even educational institutions are being involved in it. The University Grants Commission (UGC) has sent an official note to all affiliated universities and colleges directing students to take a security pledge on the birth anniversary of Sardar Vallabhbhai Patel. On that day, declared as National Unity Day, 30 million students have been asked to take the pledge: “I dedicate myself to preserve the unity, integrity and security of the nation and to strive hard to spread this message in the spirit of unification of my country.” The UGC note also asks educational institutions to invite freedom fighters to their campuses to talk about nationalism. UGC has asked all these institutions to keep the Human Resource Development Ministry informed of their events. The UGC directive, coming at a time when incidents of jingoism and patriotic hysteria are sweeping the country, could take dangerous proportions.
Do we need to trumpet our patriotism? Do college and university students need to give proof of their nationalism? Would not the demand for proof of nationalism mean taking jingoism to an absurd new level? Would not force-feeding of nationalism be counterproductive? Should not well-meaning institutions like UGC remain above controversy? These are questions that every right-thinking person must ponder to ensure that patriotism and nationalism are not relegated to naked jingoism!
India is a huge market of Chinese items as they are cheaper and easily available everywhere
Ahead of Diwali, Christmas and New Year celebrations in the country, a social media campaign is on in a big way against ‘Made in China’ goods. #BoycottChina, #BoycottChineseproducts have trended on Twitter recently. Please pledge “This Diwali we will only buy Indian, regardless of price and not Chinese,” was tweeted from the handle Fearless Hindu.
In the midst of such a movement sweeping the length and breadth of our country, India hosted a summit of BRICS countries amidst a prickly domestic mood at Goa on October 15 and 16 because China was one of the invitees. This apparently did not augur well for the possible interaction between Indian Prime Minister, Narendra Modi and Chinese President Xi Jinping. Water has always been a very emotional issue in India, and China has committed the folly of blocking the flow of river waters to our country.
Little doubt that social media is abuzz with calls for boycotting Chinese goods as punishment for backing Pakistan. The reason is China’s continued support for Pakistan and its voting against Indian interests in the United Nations. China’s shielding Jaish-e-Mohammad head Masood Azhar has also not gone down well with people. The campaign against Chinese goods is an indication of a new moment sweeping the nation in the aftermath of attack on Uri Arm base and subsequent surgical strikes by Indian Army on Pakistan launch pads.
What triggered the boycott Mohan Bhagwat, the RSS Chief has openly declared the need for boycott of Chinese goods “We speak about self-dependence and standing up to China. The government seems to be standing up to it. But where will the government draw strength from if we don’t stop buying things from China”. This led to a campaign of sorts against Chinese goods coming to India.
However, the campaign went into a frenzy after an allegedly fake letter which was claimed to be signed by none other than Prime Minister Narendra Modi urging the Indian consumers to use ‘swadeshi’ products during Diwali and repulse Chinese goods. The letter became viral on social media platform. The fake letter was circulated all over social media sites like Facebook and Twitter, and also on WhatsApp. The Prime Minister’s Office, however, was quick to contest the veracity of the letter and in a
tweet clarified that the document was not authentic.
What added fuel to the fire was the dormant anger against China for blocking India’s bid to join Nuclear Supplier Group. Also China is viewed as a major road block by Indians towards her permanent seat in United Nations Security Council. In the aftermath of Uri terror attack, China provided Pakistan unconditional support in many international stages. How China is going against can be understood from the fact that China made a large quantum of investments in Pakistan and Pakistan occupied Kashmir.
How China is benefiting from India
Though there are many countries that have trade partner relations with India but it is China which is the largest trade partner of India.
Over sixth of India’s total imports are from China. Another disturbing factor is that while import from China had been growing at 20 per cent over the years, the Indian exports have been witnessing a slide during the corresponding period due to various factors including fall in global crude prices.
Boycott impact on China
India is a huge market of Chinese items as they are cheaper and easily available everywhere. Cellphones, laptops, solar cells, fertilizers, keyboards, displays and communication equipment are India’s chief imports from China, according to our analysis of Ministry of Commerce data. Other major imports from China include tuberculosis and leprosy drugs, antibiotics, children’s toys, industrial springs, ball bearings, LCD and LED displays, routers, TV remote controllers and set top boxes.
The campaign against Chinese goods is an indication of a new moment sweeping the nation in the aftermath of attack on Uri Arm base and subsequent surgical strikes by Indian Army on Pak launch pads
The most alarming impact of Chinese goods on Indian industry has been observed in the Indian toys industry. The industry body, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) study says that 40% of Indian toy companies have closed down in the last five years and rest 20% on the verge of collapse as Chinese products are flooding into Indian market, the biggest threat to the Indian toy industry, reveals the ASSOCHAM study. China has the largest toy market in the world and it accounts for more than 45 percent in the World’s toy market whereas India’s Toy Industry has a meager share of 0.51 percent, reveals the study “Indian Toy Industry- the current scenario”. It says that “Only 20 per cent of the Indian market is served by Indian manufacturers and rest by import of toys from different countries mainly from China and Italy. According to the study, it is found that nearly 40% of toy companies have already closed down”, according to D S Rawat, Secretary General ASSOCHAM. Around 50% of the toy units are in Delhi and NCR, 35% are in Maharashtra while the remaining 15% are scattered all over the country. The toy industry in India is concentrated mainly in the small and cottage sectors, with about 4000 manufacturers in all, adds the study. The Assocham study says that the biggest threat to the Indian toy industry is the competition faced by the Chinese products which offer a wide variety of toys to the people in India and are also available at cheaper prices. The Indian market is flooded with Chinese toys which are destroying the Indian toys industry and small & medium toy manufacturers are almost on the verge of collapse.
According to the study, Indian toy industry is estimated to be around Rs 8,000 crore and is expected to grow at 30% by 2016-17 because of the rising demand of toys by the middle class population spending huge amounts for their children. Indian toy manufacturers are facing difficulty in surviving in the market. Nearly 2,000 SMEs have closed so far in the last 4-5 years with the rise in imports from China & Italy. The manufacturers mainly from Allahabad, Delhi, Kanpur, Lucknow and Patna have closed down, added Rawat. The Chinese goods offer a wide variety at a cheaper price and attract the children of all ages, the wide range like fun games, electronic toys, board games, construction toys, stuffed toys, educational games, toy cars, etc. Currently, the industry employs around 30 lakh people both in the organized and unorganized sector. With the industry growing, employment opportunities are also expected to accelerate. ASSOCHAM study anticipates the employment to be around 50 lakh by 2016-17 with the industry growing at 30%. Small toy shops cater to the masses, while branded ones like FisherPrice, Funskool, Hamleys, Lego and Mattel cater to the middle and high-class. Some large MNC toy manufacturing units like Mattel and Funskool have their presence in India. Funskool Toys is the largest toy producer in India. With hash tags like #BoycottChina and #BoycottChinese products trending on Twitter and patriotism.
The business of wooing Dalits goes a step ahead
Business has so far been almost unfamiliar territory for Dalits. Different political parties have for ages been luring Dalits with reservation in jobs for vote bank politics. However, Prime Minister, Narendra Modi has gone a step further by offering preferential treatment and special incentives to Dalits for promotion of businesses. The announcement by the Prime Minister at Ludhiana, Punjab, the other day and help to Dalit entrepreneurs may be a welcome move, but when we correlate it with the forthcoming elections in Punjab and Uttar Pradesh, one can read between the lines that the newborn love for this segment is a clever move to woo Dalit voters.
Unwittingly, over the years, the Bharatiya Janata Party had created an anti-Dalit perception after the Dadri, Hyderabad, Dadri, Una and Mewat incidents. Even otherwise, the BJP’s obsession with ‘Hindutva’ agenda had long been well known.Punjab has a 31.94 percent Dalit population, which was reason enough to hold the PM’s function in the poll-bound state. The event offered Narendra Modi an opportunity to attempt a Dalit outreach. Modi engaged his audience when he said that “My Dalit brothers and sisters should not stand in queue to seek jobs, instead they should give jobs to others,” he said, adding that his “head hangs in shame” over atrocities on Dalits.
According to the last census, four states account for nearly half of the country’s Dalit population. Uttar Pradesh stands first with 20.5 percent of the total scheduled caste population, followed by West Bengal with 10.7 percent, Bihar with 8.2 percent and Tamil Nadu with 7.2 percent rank third and fourth. Scheduled Castes form around 16.6 percent of India’s population while Scheduled Tribes number is 8.6 per cent of total population.
The 2011 census recorded nearly 20.14 crore people belonging to various Scheduled Castes in the country. As per the 2001 census, the number was 16.66 crore. The Dalit population showed a growth of 20.8 percent, whereas India’s population grew 17.7 percent during the same period. The growth in Scheduled Caste population was 20.8 per cent while that of Scheduled Tribes was 23.7 percent. Though UP has the largest chunk of the total SC population, Punjab has the largest share of Dalits in its population at 31.9 percent. Himachal Pradesh and West Bengal follow Punjab with 25.2 percent and 23.5 percent. In Tamil Nadu, Dalits account for about 18 percent of the population. Lakshadweep has the highest proportion of Scheduled Tribes at 94.8 per cent of its total population.
Uttar Pradesh seems most important to BJP among all other states going to poll in 2017. A win in this state would boost BJP’s strength in the Rajya Sabha where key legislation have often been stalled by opposition. However, Modi faces a tough challenge to woo Dalit voters in this state where caste is the most important factor for voters. The reasons are varied. Firstly, the four-time former chief minister Mayawati considered as most powerful Dalit politician is making a desperate bid to wrest power. And secondly, the projection of the BJP as a party of upper-castes, elite and Hindu hardliners has caused image problems for Modi. These segments of BJP have been frequently attacking Muslims and Dalits. In Modi’s home state of Gujarat, a video of Dalits being beaten for skinning a dead cow, has gone viral. Poor Dalits earn a living by selling the carcass of dead animals. Naturally, as was expected, the attacks prompted widespread Dalit protests. With the BJP on the back foot, Modi himself had to clarify: “If you want to attack, attack me, not Dalits.” The BJP president Amit Shah too swung into action and sat cross-legged on the ground and shared food with Dalit families. Taking a cue, the party lionised the legacy of former Dalit leader B.R. Ambedkar.
What could be a cause of worry for the BJP could be that after the party government took the reins in 2014, there were 44,941 attacks against Dalits in the following year (2015) as per the data compiled by the National Crime Records Bureau. In Uttar Pradesh, there were 8,358 attacks against Dalits, up from 8,075 in 2014 during 2015. According to a report by the National Human Rights Commission, a crime is committed against a Dalit in India every 18 minutes. Sadly, each day three Dalit women are raped and as many murdered.
The data suggests that Dalits are not allowed to enter police stations in 30 percent of villages and in 35 percent government schools Dalit children are still asked to sit separately. Ironically as per a report of National Commission for Scheduled Castes, Modi’s home state Gujarat reported the highest crime rate against Dalits followed by Chhatisgarh and Rajasthan in the year 2015.
Alarmed, the BJP-led government at the Centre brought new legislation. The Parliament passed SC and ST Prevention of Atrocities Amendment Bill in December 2015 to curb crime against Dalits and to enable entry into all places of worship, education or health institutions. However, this has failed to check or arrest crime against Dalits. Some change is taking place, particularly in urban areas, where economic parameters matter more than caste order or where social movements against untouchability have brought a sea change in perceptions. However, Dalits are watching with dismay the hollowness of current hyper-nationalism or jingoism.
Conscious of this hard reality, the BJP celebrated Prime Minister Narendra Modi’s birthday recently as ‘Sewa Diwas’ (day of service) across the country aimed at wooing Dalits votes ahead of the 2017 Assembly polls. The ‘Sewa Diwas’ is the beginning of a series of programmes the party plans to organize to wrest the Dalit votes from the Congress and the Bahujan Samaj Party. How BJP has gone into overdrive could be understood from the fact that it has converted Dr BR Ambedkar House in London into a memorial. At a recent meeting of RSS at Nagpur, a large statue of Dr Ambedkar adorned the dias. The party is finding new strategies to woo Dalits.
The party think tank has suggested taking Dalits to their pilgrimage places on the lines of Punjab Chief Ministers’ Tirath Yatra Scheme. So much so that BJP chief Amit Shah took a dip in Narmada river with Dalit saints in Ujjain. The BJP has also come out with a social campaign named “Vichaar Kumbha” involving Dalits to have a dialogue with people from upper castes in slums and villages. The party has organised Dhamma Yatras in Dalit hamlets. The idea is to strengthen its roots with Dalits to reap political benefits in the forthcoming elections.
Now at a time when the BJP has gone into overdrive to woo Dalit voters, the Shakespearean Hamlet like dilemma for the party “To be or not to be” continues as a section is of the view that this could alienate upper-castes, elite and Hindu hardliners who have traditionally been its core strength.
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