The “immediate short term benefit to the Government will be Rs.50,000 crore,” says an SBI research report.
The Centre’s surprise November 8 decision to withdraw legal tender status to Rs.1,000 and old Rs.500 notes as a step aimed at striking at the circulation of ‘counterfeits’ and ‘black money’ has triggered much speculation on exactly how much money is likely to return to banks – a parameter that may determine the relative success of the demonetization.
With less than four weeks to go before the December 30 deadline for depositing the withdrawn high-denomination currency, the State Bank of India research report estimates that about Rs.13 lakh crore of the Rs.15.4 lakh crore of such notes in circulation will return to banks, leaving at least Rs.2.5 lakh crore outside the system.
Referring to the Centre’s latest income declaration scheme, the report projected that of the Rs.2.5 lakh crore that may fail to return before the December 30 deadline, about Rs.1 lakh crore, would likely be disclosed under the self-declaration of the undisclosed income scheme and would attract a tax of 50 per cent.
“We conservatively assume that Rs 1.5 lakh crore will not be disclosed by the individuals and this will purely be an extinguished currency liability,” the report said.
The government, in an affidavit submitted to the Supreme Court last month, had projected that about Rs.10 lakh crore was expected to come back into the banking system.