REASONS FOR DEMONETIZATION IN INDIA (2016)




REASONS FOR DEMONETIZATION IN INDIA(2016) 
There are major four reasons due to which the Government Of India had announced Demonetization in 2016,
·        * BLACK MONEY
·       *  NON TAX COMPLIANT SOCIETY
·       * COUNTERFEIT CURRENCY
·       * TERROR FUNDING

1.) BLACK MONEY -
The main motive for demonetization was to curb black money in India i.e. income which had not been reported and untaxed, or income earned through illegal activities, corruption etc.
 So, there was around Rs. 15,418 lakh crore banknotes in India, of which the Government Of India were aimed to replace them with new currency notes and curb black money.
2.) NON TAX COMPLIANT SOCIETY –
The non tax compliance is range of activities that are illegal and unfavorable and  unethical in the eyes of law and to government’s tax system. This includes tax evasion and sometimes tax avoidance in the form of falsification of accounts, omission of material facts ,delay in filing returns and avoid taxes.
So the demonetization is undertaken in order to make the non tax compliant society into a tax compliant society as there was only Rs 7 lakh crore direct tax collection in the year 2014-2015 and only Rs 7.5 lakh crore in the year 2015-2016.
3.) COUNTERFEIT CURRENCY –
Fake Indian Currency Notes (FICN) means counterfeit currency notes which are circulated in India or in Indian economy.
These fake notes are mainly used for terror related activities. These fake money are also for many other illegal activities.
In order to remove this problem, several central and state agencies joined together and Ministry Of Home Affairs constituted a Fake Indian Currency Notes Co-Ordination Centre (FCORD) to curb this menace and also Government decided to announce Demonetization.
The data and statistics shown by RBI Report 2017-2018 says that the number of counterfeit Rs.1000 notes rose to 1,43,099 pieces in 2015-2016 from 1,31,190 pieces in the year 2014-2015 and while the trend of Rs.500 was 2,73,923 in year 2014-2015 and2,61,695 in the year 2015-2016.

4.) TERROR FUNDING -
The counterfeit currency and fake Indian currency notes are used as a medium to support and promote terrorism in India. There was an emergence of funding for arms smuggling and terrorists in India. There were many incidents of stone pelting in Jammu & Kashmir and many terror attacks also. The criminals take Rs.500 for stone pelting and Rs.1000 for other terror attacks. As per the data, the stone pelting incidents were increasing day by day, in this sense the stone pelting incidents were highest in July, 2016 with stone pelting incidents of 1133.
Stone Pelting Incidents In JAMMU & KASHMIR
MONTH
STONE PELTING INCIDENTS
April, 2016
97
May, 2016
38
JUNE, 2016
63
JULY, 2016
1133
AUGUST, 2016
825
SEPTEMBER, 2016
687
OCTOBER, 2016
245

So these are the major reasons due to which the Government Of India has decided to demonetize the Rs.500 and Rs.1000 banknotes in the country and to go for an formal economy.

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