Old high-value notes worth ₹11.55 lakh crore have come back into the system since the government announced its demonetisation drive on November 8, the Reserve Bank of India (RBI) said on Wednesday. And with another three weeks to go before the December 30 deadline (by which people have to deposit their old ₹500 and ₹1,000 notes), the entire ₹14 lakh crore in circulation before demonetisation is likely to come back into the system, sources said.
“Depositing money in banks does not mean the colour changes from black to white. The unaccounted money will be scrutinised to determine the tax on that,” finance minister Arun Jaitley said on Thursday.
There have also been reports that revenue secretary Hasmukh Adhia have said that the entire amount of demonetised money will come back into the system. However, on Thursday, Adhia denied the reports. “Did not make prediction that govt expects all demonetised money to come back to the system,” he said in a tweet.
The fresh income disclosure scheme under the Pradhan Mantri Garib Kalyan Deposit Scheme — which allows people with unaccounted cash to come clean by paying a 50% tax — is the main reason for the surge in deposits, said the sources quoted above.
However, the numbers have cast a sudden doubt on the expected windfalls from the deposits, as well as on the ₹11.55 lakh-crore figure itself.
The country’s largest bank, State Bank of India, had earlier said in a report that ₹2.5 lakh crore may not even come back into the system. Government estimates had put the figure at ₹3-4 lakh crore, on the assumption that people may choose to get rid of the unaccounted cash instead of facing penalty.
The government would have gained if a part of the money did not return to the system as it would have reduced the RBI’s liability, leading to a higher surplus for the exchequer, which, in turn, would have helped better the country’s fiscal position.
But, on Thursday, SBI raised questions on the ₹11.55 lakh-crore figure, and said that the possibility of double counting of money deposited in banks cannot be ruled out, due to interbank deposits. “There is possibility of double counting of 10% to 15% in banks deposits,” an SBI report said.
“We expect 100% (of the money) to come back into the system. But it is too early to suggest whether this would have any negative bearing, as much would depend upon how much tax comes on the amount collected,” Girish Vanvari, partner and head of tax at KPMG India, told HT.