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Government notifies Specified Bank Notes (Cessation of Liabilities) Act, 2017

The Union Government has notified the Specified Bank Notes (Cessation of Liabilities) Act, 2017 to prohibit the holding, transferring or receiving of scrapped old Rs.500 and Rs. 1000 currency notes from 31 December, 2016,

This law makes possession of more than a certain number of the old Rs. 500 and Rs. 1,000 notes a criminal offence.

Key Features of Act
  • It ends the liability of the Reserve Bank of India (RBI) and the government on the demonetised Rs.500 and Rs. 1000 currency notes.
  • It prohibits the holding, transferring or receiving of demonitised notes from 31 December, 2016 and confers power on the court of a first class magistrate to impose the penalty.
  • Possessing more than 10 pieces of old notes by individuals and more than 25 pieces for study, research or numismatics purposes will attract a fine of Rs. 10,000 or five times the value of cash held, whichever is higher.
  • Fine of a minimum of Rs, 50,000 will be imposed for a false declaration by persons for being abroad during the demonetisation period (9 November-30 December, 2016).
Background

The Union Government had demonetised old Rs.500 and Rs. 1,000 notes from November 2016 on the recommendations of the RBI’s central board to eliminate unaccounted money and fake currency notes from the financial system. As a follow up, The Specified Bank Notes (Cessation of Liabilities) Act, 2017 was passed by Parliament in February 2017 and received assent of President Pranab Mukherjee on 27 February 2017. The law aims to eliminating the possibility of running a parallel economy using demonetised currency notes.  The demonetisation had abruptly sucked out 86% of the currency in circulation in the form of Rs.500 and Rs. 1,000 out of the system.

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MEITY to promote digital transactions in place of NITI Aayog

The Union Government has shifted the responsibility of promoting digital transactions in the country to the Union Ministry of IT and Electronics (MEITY) from NITI (National Institution for Transforming India) Aayog.

In this regard, Government already has changed the business transaction rules to enable MEITY to promote digital transactions, including digital payments.

Key Facts
  • This decision was taken in view of the core competence of MEITY to promote digital means for various transactions.
  • NITI Aayog which is a think-tank is more focused on monitoring and suggesting ways to improve various government schemes rather than getting involved with implementation.
  • MEITY is responsible for promotion of e-governance schemes for empowering citizens as well as promoting inclusive and also sustainable growth of electronics and IT sector and IT-enabled services industries.
Background

Earlier, the Central Government had set up a committee under the chairmanship of NITI Aayog CEO Amitabh Kant to push adoption of e-transactions amid the cash crunch faced by citizens due demonetisation. NITI Aayog also implemented two programmes Lucky Grahak Yojana and Digi-Dhan Vyapar Yojana to promote e-payments. Transfer of the business to Ministry will help Government to effectively promote digital transactions to achieve its target of reducing cash to GDP ratio to around 8%, which is at present hovering over 13% in the country.

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Income Tax Department launches Operation Clean Money

The Income Tax Department (ITD) launched Operation Clean Money (Swachh Dhan Abhiyan), an e-platform to analyse large cash deposits made during the demonetisation window (9 November to 30 December 2016).

Under it, e-verification of large cash has been done using data analytics for comparing the demonetisation data with information in ITD databases.

Key Facts
  • In the first batch of the operation,around 18 lakh persons have been identified in whose case, cash transactions do not appear to be in line with the tax payer’s profile.
  • It comprises account-holders whose deposits did not match their incomes, as per data with the IT department, will be alerted on their e-filing portals.
  • IT department has sent emails and phone text messages to these accountant holders to seek their explanation about the source of funds and a response within 10 days.
  • In absence of a response, they will receive a notice from the tax department or further action. The verification will also be closed if the cash deposit is declared under Pradhan Mantri Garib Kalyan Yojna (PMGKY).

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