India has put 1.8 million citizens on notice for potential tax evasion, officials said Tuesday, as it begins scrutinising suspect cash deposits in the wake of a sudden ban on high-value banknotes.
Prime Minister Narendra Modi announced in November that all 500 and 1,000 rupee notes would be removed from circulation, rendering 86 percent of India’s currency void in an instant.
The shock decision was presented as a blitz on corruption and undeclared income, or ‘black money’, hoarded by tax evaders.
But so-called demonetisation resulted in long queues outside banks and painful cash shortages for hundreds of millions of people reliant on hard currency.
The tax department said Tuesday the first phase of “operation clean money” had flagged 1.8 million account holders whose large cash deposits were suspect.
“The initial phase of the operation involves e-verification of large cash deposits made during 9th November to 30th December 2016,” it said in a statement.
The government had said those whose deposits were suspicious would be singled out for investigation, while an amnesty scheme allowed Indians to declare any hidden wealth and pay a penalty.
The sweeping cash abolition was meant to bring billions in undeclared money back into the formal system but the government was forced onto the defensive as frustration grew at limits on withdrawing new banknotes.
The government had put temporary restrictions on the amount of money people could exchange or withdraw in an attempt to wean the country off cash and bring more wealth into the formal — and taxable — banking sector.
India’s central bank announced late Monday that it would loosen some of the restrictions on cash withdrawals although most savers are still only allowed to withdraw a maximum of 24,000 rupees in cash each week.
Modi has repeatedly defended the scheme, accusing its detractors of being tax evaders and repeatedly urging all Indians to switch to non-cash payment methods.
Cash accounts for 90 percent of transactions in India and the government had said it would take time before new bills are distributed.