How Can Demonetization Affect Union Budget 2017?

We all must have read about the several impacts of demonetization. Some of the news associated with this demonetization was the good ones, while others gave us the bad news. With the release of Union Budget dates coming closer, many of us are thinking about all the possible scenarios that demonetization can have over this Union Budget 2017. Almost everyone is guessing about whether Mr. Narendra Modi will cut the tax rates in this Budget or not. In this article, we present you one of the another interesting side effect of Demonetization.

• Where Did The Entire Process Of Demonetization Go Wrong?

Mr. Narendra Modi took an initiative, a surprising move of Demonetization in order to reduce the amount of Black Money present in India. But obviously, this move was not that much successful. One reason for this failure that I came up with, was that the entire system is corrupted. While people were waiting for the cash in front of the Banks and ATMs, some of the bank officials itself were involved in subverting of the system again. As a result of this, all the loose cash came in the bank.

• Demonetization And Union Budget Tax Proposal :

The huge amount of money deposited in the banks, will be accounted at every prospects. And hence, taxes will be recovered. Also, since Demonetization, people were compelled to do cashless transactions, because of the cash crunch scenario. This has contributed a lot in moving India towards cashless society. This will obviously enable the government to catch tax evaders. Ultimately, there will be a definite increase in the level of taxation. The impact of Demonetization might not be a very good news for us, but it is definitely going to be good news for all the businessmen.

Due to the demonetized notes, we are speculating that the government will plan on to revise the minimum taxable income to Rs. 4 lakhs per annum, from Rs 2.5 lakhs. The government will do its best to promote cashless transactions. This will be done by giving discounts at toll booths when payment will be made using cards. We also have some relief at POS terminals towards the Merchant Discount Rates, when we will make use of debit cards for the transactions. It is due to this demonetization only that some additional benefits will be provided to those customers that will make use of cashless transactions. This is expected to be a part of the Union Budget 2017-18. We may also see some kind of tax benefits for people who will operate a cashless business, which can also include indirect tax benefits on goods and services sold via cashless mode.

• Demonetization And Corruption: 

I am hearing this term “Demonetization” since November 8^th, of 2016. Discussions took place, not just in India, but rather throughout the world. Now is the time that people are speculating about the possible implication of demonetization in the Union Budget 2017. Due to Demonetization, there is a restriction on the spending of cash. This will help the government to bring down the extreme level of corruption present today. All of this will definitely enable the government to make direct as well as indirect taxes reasonable.

• Lower Interest Rates:

The State Bank of India, i.e., the SBI has reduced the deposit rates from the period of 1 year, to 455 days at the interest rate is 6.9%, which is a decrease of around 15 basis points from what used to be earlier. Also, the interest rate for the deposit period between 211 days to 365 days will be at the rate of 7%. This might not be a very good news for us but good for businessmen. People deposited large amount of money in the banks, since the demonetization took place. Comparatively, there was much less credit demand, which will lead to the decrease of even the lending rates. This will probably give credit expansion as well and will also provide a stimulus to the economy.