India's Shocking Move to Catch Tax Evaders

It's pulling its two largest bank notes from circulation
By Jenn Gidman,  Newser Staff
Posted Nov 9, 2016 3:42 PM CST
India Drops 2 Largest Bank Notes to Stave Off Corruption
A journalist takes a video of a specimen of the new Indian 500-rupee bank note displayed at the Reserve Bank of India headquarters in Mumbai, India, on Wednesday.   (AP Photo/Rajanish Kakade)

A surprise announcement out of India Tuesday night is being called by local media a "surgical strike" against currency corruption that's infiltrated the nation, the BBC reports. Per CNNMoney, India Prime Minister Narendra Modi announced that the country's two largest current bank notes—the 500-rupee note and 1,000-rupee note (equivalent to about $7.50 and $15, respectively), which equal about 85% of the cash currently moving around India—were taken out of circulation in their current incarnation as of midnight Tuesday, which the government hopes will lure people out of hiding who've been stockpiling money without paying taxes on it. The idea is to force them to swap the cash for legit replacement money at banks and post offices before the 50-day deadline for such trades arrives on Dec. 30.

Experts say there's a preponderance of this so-called "black money" in India, and by drawing it all out in droves, banks will be able to send up a red flag if people come in with large amounts, possibly helping the government catch tax evaders. There are about 16.5 billion of the 500-rupee bills and 6.7 billion of the higher denomination now in circulation (ATMs will be shuttered Wednesday and Thursday so more notes won't be introduced into the flow). In place of the now-almost-worthless notes, the government will issue new 500- and 2,000-rupee notes with images of Gandhi on them, the Wall Street Journal reports. (More India stories.)

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