The income tax department will keep a close watch on cash deposits into bank accounts post-discontinuation of R500 and R1,000 bank notes.
“The department has got its own scrutiny system. One doesn’t need to panic. All legitimate money will be deposited,” said Central Board of Direct Taxes chairperson (CBDT) Sushil Chandra. Asked if the government would increase the ceiling limit for cash deposits, Chandra said, “We are working on it.”
Prime Minister Narendra Modi on Tuesday said people holding notes of R500 and R1,000 denomination can deposit the same in their bank and post office accounts from November 10 till December 30. ATM withdrawals will be restricted to R2,000 per day and withdrawals from bank accounts will be limited to R10,000 a day and R20,000 a week. Banks remained closed on Wednesday and ATMs will also not function for two days.
“The demonetisation step will not only lead to reduction in black money kept in cash, but will also impact other asset classes in which black money was being kept. The choking of the parallel economy will also have an impact on the real economy,” said Jaijit Bhattacharya, partner at KPMG in India.
CBDT chairman Chandra also said the special investigation team (SIT) recommendations on black money would be considered while preparing the forthcoming Union Budget.
“The impact would be felt by every part of the economy with the real estate sector feeling the biggest and a far-reaching impact. Consumption would be hit India-wide in the short term. The e-commerce sector having cash on delivery may feel impact on sales. Every unorganised sector in every trade will feel the impact of this bold move,” said Rakesh Nangia, managing partner at Nangia & Co.
However, people in the organised sector would not feel any impact. For individuals who have legal cash in hand, they can easily deposit the same in the bank account with Aadhaar card or PAN card. This move will give a sharp boost to all formal channels of payment which will help the formal economy to grow in the coming future.