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Demonetisation is the act of removing a currency unit of its status of a Legal Tender.

It was done on 8th November, 2016

Government announced that the currency notes of Rs500 and Rs1000 were demonetised

and were no longer legal tender


Objectives of Demonetisation

1 The main objective was to curb black money.

2 To reduce tax evasion

3 To bring back black money into the banking system

4 To stop circulation of fake currency

5 To curb terrorism

6 To Tackle problem of corruption


Features of Demonetisation

1 It was a 'Tax Administration Measure'

People who had black money had to declare their unaccounted wealth and pay taxes for the same

2 Government indicated that Tax Evasion will not be tolerated


3 Channelizing savings into formal financial system

Withdrawing amount from banks will go on

Banks will also continue to provide loans in some new schemes, with lower interest rate.


4 It aims to create a Cash-less or Cash-lite economy

By channeling more savings into formal financial systems

Improving tax compliance

Promoting digital transactions wherever possible


Impact of Demontisation

1 Money/ Interest Rates

Cash transactions decreased

Bank deposits increased

Financial savings also increased


2 Private wealth

Real estate prices fell, so private wealth declined


3 Public sector wealth

No effect


4 Digitisation

Digital transactions increased as new services like RuPay cards, Paytm were on a boom


5 Real Estate

Prices declined


6 Tax Collection

Rise in income tax collection because of increased income disclosure



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In the following questions, select the correct answers:

1 Which of the following is not a benefit of Demonestisation in India?

A Control over corruption

B Counterfeiting use of high demonestisation notes for illegal activites

C Control on black money

D More demanding customers

View Answer



Which of the following was not a feature of Demonetisation?

A Channelizing savings into formal financial system

B Tax administration

C Cash less economy

D Promotion of black money

View Answer



____ and ____ currency notes of old Mahatma Gandhi series were banned as legal tender money on 8th

November, 2016.

A Rs50 and Rs100

B Rs500 and Rs1000

C Rs100 and Rs500

D Rs500 and Rs2000

View Answer



What kind of Tax is GST?

A Direct Tax

B Indirect Tax

C Depends on the type of goods and services

D None of the above

View Answer

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