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
MCQ Other Books
Q1
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
D More demanding customers
Explanation
The demands of customer have no relation with the implication of Demonetisation in India
All the other points mentioned are benefits of Demonestisation
Q2
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
D Promotion of black money
Explanation
This is not a feature of Demonetisation
Rather, one of the objective of Demonetisation was to bring back black money into the banking system
Q3
____ 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
B Rs500 and Rs1000
Explanation
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
Q4
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
B Indirect Tax
Explanation
Goods and Services Tax is an indirect tax used in India on the supply of goods and services.