Sudden demonetization is not a new phenomenon to India. In fact, this is the third demonetization since 1946 and 1978. However, the circulation of the higher denomination banknotes during that period was very limited and most of the higher denomination banknotes were held with banks only. According to Reserve Bank of India (RBI) records in 2016, Indian rupee banknotes worth 16,664 billion are being circulated among the public. Of these 86% (14.180 billion) are in Rs 500 and Rs 1000 banknotes. It is a general thought that the corrupt hold money in the form of such 500 & 1000 rupee bills. Therefore, the government stressed the fact that demonetization of Rs 500 and Rs 1000 notes will curb the black money holdings. However, relief was provided to people as they could exchange their old banknotes with the banks from November 10, 2016. Further, they could also deposit these old banknotes in their respective bank accounts. Additionally, the use of these old banknotes for necessary services such as purchasing petrol, diesel, air tickets, and rail tickets was permitted by the government. Since the announcement was made, people have had a mixed reaction to this policy. However, mayhem occurred on November 10, 2016 when huge crowds flooded every single bank in the country. The government started facing major criticism because the banks did not have enough of the new banknotes to meet the daily requirement of the people. Still, the government insisted that these are just a few initial hiccups that are being faced and ultimately this would defeat the black money monster that had crippled the economy for the last three to four decades. One important point to be noted is that the beginning of the first phase marked the day the announcement was made. However, banks were closed on November 9, 2016, the second day of the phase, and resumed operation from November 10, 2016. This is an important reason why we had higher tweet collections on November 8 and 9, 2016, as people were initially supporting this historic decision taken by the Indian government.

Which of the following choices were given to the black money holders?

Declare their unaccounted wealth and pay taxes at a penalty rate

Those who had black money faced 3 difficult choices:

1. declare their uncounted wealth and pay taxes at a penalty rate.
2. continue hiding the old notes and face tax rate of 100%
3. give back their black money and paying cost of converting black money into white