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Three months from now, the current currency will be replaced by a new one. Demonetization of the currency means discontinuity of the current Leone from circulation and replacing it with a new currency.
The decision will affect many, as black market money holders are worried about the pile of cash they were sitting on.
However, it is no doubt a bold step taken by the government which will definitely help to reduce corruption in the country. It will also help in Black Money tracking – This move will help the government to track unaccounted black money or cash on which income tax has not been paid.
Individuals who are sitting on a pile of cash usually do not deposit the amount in the bank or invest anywhere as they would be required to show income or submit PAN for any valid financial transactions. They would hide it somewhere and use it as and when necessary.
Banning high-value currency will impact people who will have no option, but, to declare income and pay tax on the same or destroy the cash somehow. Now, it is not possible to hide the money as the notes have been declared invalid.
Reduction in illegal activity – Banning high-value currency will halt illegal activity as the cash provided for such activities has no value now. Black money is usually used to fund the illegal activity, terrorism, and money laundering.
Fake currency circulation will come to a halt in a single shot. Corrupt officers, money launderers are under threat as Income tax department will take the measures to track such people.
Tax payment – Most of the businessmen who have been hiding some income will be forced to pay tax. The amount deposited can be used for the betterment of the country. There are disadvantages of currency demonetization. It may cause inconvenience for initial few days for those who have to start running to the banks to exchange notes, deposit amount or withdraw the same.
The situation can turn chaotic if there is a delay in the circulation of new currency. Cost of currency destruction – The government has to bear the cost of printing of new currency and its circulation. It makes sense when benefits of demonetization are higher. The cost of currency printing is a burden on the tax payers and is one of the many disadvantages of de-monetization.
Conclusion there are only advantages of demonetization in the long term. The government should take all the necessary steps and actions to meet the currency demand and ensure the smooth flow of new currency.
