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Journey from Black to White – What PM Modi will do next after Demonetization?

Updated on: 09 Aug, 2023 12:16 PM

Today everyone from a layman, businessman or to some high-profile executives, seems to be in chaos as many bold moves have been taken by the Modi Government during its tenure. This started with Jhan Dhan Yojna, IDS [Income Disclosure Scheme], amendments in Benami Law (to catch the Benami Property Holders), followed by the most popular event of Indian economy Demonization. To add to this furry was the poor implementation of GST. Further, now Government is linking the Aadhaar with PAN, Mobile Number and Bank Accounts – anything to everything impacting our lives.

Now, the question which must be coming into your mind, what PM Modi will do next?

We are here with some expected concrete steps which the Modi Government might take to boost and transform the Indian economy.

Another currency ban may come

The idea behind the introduction of Rs 2,000 note was to ease the shortage of money supply (i.e. to curb the effects of post demonetization). Now, there is no such need and actually, the lower denomination notes are required in the economy as Rs 2,000 note causing problems of loose change.

So, the government may plan to increase the supply of lower denomination notes such as Rs 500 and Rs 200 and restrict the supply of Rs 2,000 note. It is quite possible that these steps would lead to demonetization of Rs 2,000 note. However, we believe that this step would be taken after 2019 election.

Come back of Rs. 1000 note

The Rs 1,000-denominated note may comeback as there is a need to bridge the gap between the current Rs 500 and Rs 2,000 notes. The government’s decision to scrap Rs 500 and Rs 1,000 notes had created a massive cash crunch last year.

The new Rs 1,000 notes would come with enhanced security features as compared to its predecessor. The re-introduction of note could ease daily transactions, particularly the smaller exchanges which still mostly run on cash.

Aadhaar linking with Bank

With this initiative of government, there is a possibility that the government may track your annual income from the PAN details of aadhar linked bank accounts.

As soon as Aadhaar, PAN and your bank accounts all three would be linked, it would become easier for the government to collect data and thereafter surgical operation would be performed on all the black money holders and corrupt persons. By implementing this, benefits of various government schemes like LPG subsidy will reach to the actually needed persons. Further, it would also increase the risk of being scrutinized by the IT department.

However, the government needs to be cautious while implementing such a system as it may be used to forge the transactions.

Aadhaar linking with Property

If the government really takes this bold step, it would be their bravest attempt towards ending corruption. Most of the corrupt government officers and businessmen hide their ill-gotten money by buying lands, flats, houses and other types of immovable assets on fake names or in the names of their servants, drivers, family members etc.

If any property will be found in fake name, the Government may seize such property. This would generate revenue for the government in addition to the justice to the genuine people.

Restricting the Real Estate Sector

The government may bring a major change in real estate sector requiring all the properties to be updated online on one dashboard. This move may require that all the property holders have to approach their registrar along with original property documents, identification and address proof for online updation.

As per this provision, only post updation any property could be sold or purchased so it may restrict any buying & selling of flats, land or any other real estate between the specified time period.

Declaration of Gold & Jewellery

In the years to come, the Government may plan to declare the limits of Gold and Jewellery which can be kept by a male and female separately. If it is found over and above the permissible limits of holding, then it must be supported by sufficient proof of bills or cheque copies. Any gold beyond this may have to be declared, assessed and tax along with penalty has to be paid.

This provision may not include ancestral properties and would be designed in such way that mainly for the black money hoarders are targeted.

Abolishment of Income Tax

In the coming years, the government may take a daring move and introduce banking transaction tax. It entails the abolition of Income Tax. If done, this will be the biggest financial decision since 1991.

This tax would be charged on both cheque payments and electronic methods of transactions. The tax would be collected by government and equally distributed between Centre and the respective state where the transaction will take place.

Scrutiny of Cases

Persons who deposited cash amounting more than Rs. 5 lakhs in their bank accounts during the demonetization period received notices and whose income tax profile is not strong were required to submit their online response.

Now, based on their response and using risk-based data analytics of cash deposits in bank accounts to distinguish between genuine and not genuine cases, the tax department will issue the next set of notices and may ask the persons for detailed verification in near future.

ITD is performing data mining process and you never know when and on what transaction an income tax notice is issued to you. So, be careful and follow the law.

DTAA and Black Money out of India

The government has already started renegotiating the Double Tax Avoidance Agreement (DTAA)s with many countries and many are on the way to smoothen the process of taxation in both transacting countries.

Further, like The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 scheme, the government may plan to launch more schemes to bring back black money stashed in foreign countries and tax havens.

Change in Slab Rate or Tax Rate

In the next budget, it is expected that Government may give some tax relief to the common man either by the way of increasing the basic exemption limit or lowering the tax rate so that tax burden can be reduced on the genuine taxpayers. This move might come as an effect of current overall economic slowdown.

Lastly, we hope that in the near future, the Modi Government will surely come up with some of the concrete moves discussed above as they are imperatively required to fix the damage done to the economy and bring back India on track.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.