Finance Minister Arun Jaitley on Tuesday hinted at lower direct and indirect tax rates in the future as demonetisation resulted in higher tax revenues coming into the system from unaccounted wealth.
“So much money… operating as loose cash has today come into the banking system,” he said. “It has to be accounted for. Taxes not paid will now be recovered.”
Jaitley said future transactions would be digital as India moves towards a less-cash society.
“Once they are substantially digital they get caught in the tax net,” he said.
“Therefore the future taxation level would be much higher than what is currently being collected. This would also enable the government at some stage to make taxes more reasonable which will apply to both direct and indirect taxes.”
The November 8 announcement to demonetise high value notes has in one stroke junked 86 percent of the currency in circulation. Holders of the discontinued notes can deposit them in banks before the end of the year and withdraw money in new currency.
The money being deposited has to be accounted for and taxes paid – 50 per cent on voluntary disclosures of unaccounted money and 85 per cent for any failures.
He also warned of a ‘very heavy price’ that unscrupulous elements will have to pay for unlawfully amassing large amounts of cash, saying agencies are keeping a close eye on cash accumulations.