Demonetization - Demonetization is the act of stripping a currency unit of its status as legal tender .Theoldunitof On 8 November 2016 Government of In

Demonetization - Demonetization is the act of stripping a...

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Demonetization   is   the   act   of   stripping   a   currency   unit   of   its   status   as   legal   tender.Demonetization is necessary whenever there is a change of national currency. The old unit ofcurrency must be retired and replaced with a new currency unit.On   8   November   2016,   Government   of   India   ceased   the   usage   of   the   two   highestdenomination currency notes: Rs.500 and Rs.1000 banknotes of the Mahatma Gandhi Series,as form of legal tender, effective from 9th November 2016. The government claimed that thedemonetisation was an effort to stop counterfeiting of the current banknotes allegedly usedfor funding terrorism, as well as a crack down on black money in the country. The move wasdescribed as an effort to reduce corruption, the use of drugs, and smuggling. It was to alsopull out Fake Indian Currency Notes (FICN) which account for approximately Rs.400 crores. Advantages of Demonetisation:It helps the government to track people having large sum of accounted cash i.e. blackmoney stashed in various forms where income tax need not be paid because it is difficult totrack them. This measure will force them to deposit the money in bank and pay taxes and fineor else the next option is losing the money completelyBlack   Money   is   used   for   terrorism   funding,   money   laundering   and   fraudulentactivities. When the circulation of currency in the market stops, these activities primarily getsstalled.Inflation in the price of gold, real estate, healthcare and leisure makes it difficult forthe common man to use these facilities.Governments can estimate the income of an individual by the help of the deposit inmoney which is an indicator of better tax revenue in the economy reducing the budget deficitand the capacity of the overall fiscal policy in a country.Tax revenue can also be used towards the betterment of society by providing thesocial security needs within the country at its full potential. Taxation in western countries isas high as 50% but they have a highly organized and secured social security network for itscitizens.Facilitate the digital economy to take a front seat which is at 30% in our country, asATM   withdrawal   limits   and   directly   from   bank   accounts   have   been   limited   i.e.   cardtransactions will replace cash transactions consequentlyDisadvantages of Demonetisation:1.Cost of replacement of 500/1000 notes: 86% of the total currency distribution has
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