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Demonetisation, after all, was not an entirely wasted effort as critics allege

Monday, September 10, 2018
By Virendra Kapoor

Shock therapy pushed millions to pay taxes for fear of forfeiting  cash hordes

For someone who had minced no words criticising demonetisation when Modi first sprang it on the nation on the night of November 8, 2016, calling it arbitrary, wasteful, and disruptive, to revisit his assessment might sound opportunistic — even cynical. But, trust me, it is neither. The change in perception has been solely driven by one particular factor. Which is that at least it forced a large number of people to become honest taxpayers. In a country with a rather low tax-base, the sharp rise in the number of people filing annual income tax returns post-notebandi is a singular achievement. And not one to be sniffed at.

Remember that there were only 3.8 crore I-T assessees in 2014-15. That number rose to 6.8 crores in 2017-18, the year immediately after the administration of the bitter medicine of notebandhi, an increase of over 80 per cent. All those who for decades had merrily got into the habit of doing business in black and hiding their income from the authorities were so frightened by the real possibility of the currency hordes turning into wastepaper that they sought the security of IT returns. Modi’s shock treatment had jolted them to pay their due to the society.

Another statistic is more telling. In the pre-notebandi period, the non-salaried ITRs totaled less than a crore. But in the assessment year immediately following demonetisation, these more than doubled to 2.05 crores. Given that the salaried classes have to necessarily file the ITRs, a good percentage only to claim refunds of the taxes deducted at source, it is the self-employed non-salaried class which had all along played truant when it came to filing the annual income tax return.

Businessmen earning tens of lakhs every month did not feel obliged to pay a penny in taxes. Your neighbourhood kirana (grocery) store owner or the popular  restaurateur you patronise occasionally and who seems to be raking in big bucks did not know what an ITR was. That is, till the November 8 shock rendered them all sleepless. Mind you, this was not abnormal in a country where one of the top industrial houses had for years preened itself for being a ‘zero-tax-company.’

Of course, it was fear alone that seemed to have persuaded the non-tax paying class to try and go legit. Thus, the shock therapy of notebandi had paid off well insofar as it had made honest taxpayers of those who had all along thought it infra dig to pay taxes even if their monthly income from business or private practice, consultancy, professional services , etc., was in six figures. Even the fact that some of the ITRs disclosed zero taxable income it was a plus in the sense that it brought crores of new assessees into the system.

Yes, on the face of it demonetisation does appear to be a colossal waste. It is because everyone had assumed that all those sitting on piles of unaccounted cash would forfeit it. They didn’t. Ninety per cent of the cash in circulation was deposited into the banks. Which part of it was white and which black now poses a huge headache for the tax authorities. They have sent out notices to over eighteen lakh depositors to explain the source of the cash. Even if half of them end up forfeiting a portion of their deposits and are made to pay hefty taxes and penalties the exchequer will be richer substantially. In sum, it wasn’t an unproductive effort after all, though the messaging accompanying demonetisation could have been better thought out. Also, the gigantic mission clean-up did not seem to take into account the innate tendency of Indians for jugaad. Jana Dhan-based bank accounts were overnight flush with funds their legal owners could not have dreamt of earlier. Even if they received as baksheesh a small portion of the money from the ‘seths’ whose black money they deposited as their own, for them notebandhi was a boon. For once, they had their employers at their mercy and suitably mindful of their dignity.

‘Bombay Dost’ finds Humsafar in apex court
Predictably, the decriminalisation of homosexuality led to wild celebrations by the LGBT community. They were entitled to get back their sense of dignity and to claim their rightful place in the larger society. Even though the media, particularly the English newspapers, joined the party, it was generally amiss in not giving one man who had tirelessly crusaded for decades for the elimination of the anachronistic provision, his due. Ashok Row Kavi deserved a huge mention for the role he played, very often suffering social and familial ostracism, for openly championing the LGBT cause.

For several years, Ashok was a full-time journalist in Mumbai, employed with the same newspaper I happened to be working with at the time. It is then that I got to know him rather well. Always optimistic, never for a moment did he waver in his mission for equality for the LGBT community. Every time you met him, which professionally was almost daily, he would insist on reeling off big names from the world of business and industry, Bollywood, even media, who, according to him, were homosexual. He earmarked his entire spare time for advocacy of gay rights. Bombay Dost, India’s first gay magazine, and the Humsafar Trust, both of which waged an unrelenting propaganda onslaught for the deletion of Section 377, were founded by him.

Always ready to proclaim from rooftops that he was gay, he would often play hooky from the newspaper. Days later, when he surfaced, he would explain with a straight face that he had met a stud truck driver and had such a good time that he rode with him from Mumbai to Indore. At other times, he would invite his friends  home and urge them to try and convince his family that there was nothing unnatural about his sexual orientation. Often the guests would feel embarrassed before women members of the family, but not Ashok, who would whisper into your ears that the idea was to make them understand that he was ‘normal.’ Happily, he now has the imprimatur of the highest court in the land that he indeed is NORMAL.

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