8th November 2016 move is one of the biggest economic reforms in the history of India. Narendra Modi government banned Rs 500 and Rs 1000 notes to kill the root of black money. This move forces all people to deposit their currency in their bank account. Later once the cash deposits are received Income Tax department can account this money and penalize people who skipped tax.
Well many people must be thinking this is a good move but why is there a limit for cash withdrawal? It is clear, we as human beings are intelligent in good and wrong ways. Cash limit has been enforced so that black money is not regenerated in the future. Say if the cash limit is not there, a person would deposit Rs 50,00,000/- of old currency in 20 accounts of his associates. Post 31st March he can again withdraw Rs 50,00,000/- from all these accounts and he still has black money. If there is a weekly limit of Rs 25,000/- it would taken him 2.5 months to withdraw Rs 50,00,000/- from all these accounts. Well this activity would flag the RBI and he would invite trouble. This is scenario is hypothetical only. Currently cash withdrawal limit from ATM is Rs 2000/- in all machines, and Rs 2500/- in few, from bank you can withdraw Rs 10,000/- a day with a weekly limit of Rs25,000/-, if you have a wedding at home you are entitled to a withdrawal of Rs 2,50,000/-. Read more news on Demonetization.
Always cash allows people to have unaccounted money, thereby skipping tax. Cash restriction will force people to use digital payments method thereby government can track money flow with ease. Apart from this, there are people who only deal with digital payments. Such people are entitled to deposit Rs 2,50,000/- in their bank without causing a red flag. These people are accepting old 500 and 1000 notes with value of upto Rs 2,50,000/- in exchange withdrawing new notes from their account for a commission of 20-30%. To stop this activity also the government’s cash withdrawal limit will help.
How much ever strict the government is and how transparent the system is trying to become, the smart will always find a way to convert his/her black money into new notes of black money. The foolish will end up paying tax, the intelligent will take commission for giving up his/her new notes, and the rich will try hard to stay rich. Read Business News.