Consider the following statements about the features of demonetisatio…

Consider the following statements about the features of demonetisation:

(A) Demonetisation is viewed as a tax administration measure.

(B) Under demonetisation, those with black money had to declare their unaccounted wealth and pay taxes at a normal rate.

(C) Demonetisation is interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated.

(D) Under demonetisation, cash holdings arising from declared income were readily deposited in banks and exchanged for new notes.

(E) Some of the new deposit schemes offered by the banks will continue to provide a base for loans at higher interest rates.

How many of the above statements are correct?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Three

(A) Demonetisation is viewed as a tax administration measure. — Correct. It was a step to make people declare income and pay tax.

(B) Under demonetisation, those with black money had to declare their unaccounted wealth and pay taxes at a normal rate. — Incorrect. They had to pay taxes at a penalty rate, which is higher than the normal rate.

(C) Demonetisation is interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated. — Correct. It showed that the government would no longer accept tax evasion.

(D) Under demonetisation, cash holdings arising from declared income were readily deposited in banks and exchanged for new notes. — Correct. People with declared income had nothing to hide, so they deposited their cash and got new notes.

(E) Some of the new deposit schemes offered by the banks will continue to provide a base for loans at higher interest rates. — Incorrect. The new deposits give a base for loans at lower interest rates. More money in banks makes loans cheaper.

NCERT (2026-27 Edition): “Features 1. Demonetisation is viewed as a tax administration measure. Cash holdings arising from declared income was readily deposited in banks and exchanged for new notes. But those with black money had to declare their unaccounted wealth and pay taxes at a penalty rate.
2. Demonetisation is also interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated or accepted.
3. Demonetisation also led to tax administration channelizing savings into the formal financial system. Though, much of the cash that has been deposited in the banking system is bound to be withdrawn but some of the new deposits schemes offered by the banks will continue to provide a base loans, at lower interest rates.”