It pays to be honest: FM Arun Jaitley

New Delhi: It pays to be honest, said Finance Minister Arun Jaitley yesterday, describing the government's decision to scrap Rs 500 and Rs 1,000 notes overnight as a "game changer". People with black money are worried, he added.

The minister said the bold move would put an end to the parallel economy. "If a longer window was given, people would have found ways to evade tax," he said, explaining the government's sudden withdrawal on Tuesday of Rs 500 and Rs 1,000 banknotes in the country's biggest crackdown against black money, corruption and counterfeit currency.

Teething troubles in the transition to new high denomination notes of R500 and R2,000 would be sorted out soon, the minister promised.

Jaitley also said it must be clear that the deposit of the now-defunct notes in bank accounts will "not provide any relief from taxation".

"It should be clear that it is no immunity scheme. This (deposit) does not provide any relief from taxation. The law of land will apply," he said, but also emphasised, "If the money is legitimate, which had been previously withdrawn from the bank or earned legally and saved and had been disclosed, there is nothing to worry about."

The finance minister reassured that housewives and farmers with genuine savings need not worry about depositing cash in their bank accounts. "The small amounts that people will deposit like R25,000, R30,000 or R50,000 lying in homes for expenses, whatever money could be there for meeting normal family expenses, they need not worry. They can go to banks."

The minister said for the first one or two weeks there could be a shortage of the replacement currency, but he expected it to be streamlined after two to three weeks.

The move would help make more transactions digital, he explained, adding that now people would disclose income and pay taxes. "India will become a more tax-compliant society," Jaitley said.

"It will have a positive effect on the Indian economy in the long run."