Q.Choose the incorrect statement with respect to demonetization : (A) The two largest denomination notes of ₹ 500 and ₹ 1000 were demonetized with immediate effect, ceasing to be legal tender except for buying properties. (B) The aim of this step was to curb corruption and accumulation of black money. (C) It led to the tax administration channelizing savings into the formal financial system. (D) Restrictions were placed on the convertibility of domestic money and bank deposits.

Demonetisation in November 2016 was one of the most dramatic economic policy moves in independent India. The government announced that ₹500 and ₹1,000 notes — then the two largest denominations in circulation — would no longer be legal tender from midnight of that very day. The stated purpose was to strike at the root of corruption, counterfeit currency, and the hoarding of unaccounted ("black") money. It was also intended to push savings into the formal banking system, widen the tax net, and encourage a shift toward a less-cash economy.

Let us examine each statement carefully against what actually happened.

Statement (A) claims that the demonetised notes ceased to be legal tender "except for buying properties." This is where the error lies. The ₹500 and ₹1,000 notes ceased to be legal tender with immediate effect, and there was no exception for buying properties or for any other transaction. In fact, the whole point of the move was that these notes could no longer be used for any purchase — property or otherwise. Holders were instead given a window to deposit them into bank accounts or exchange them for new currency within specified limits. So the "except for buying properties" part is simply not true.

Statement (B) — that the aim was to curb corruption and black money — is correct. This was indeed one of the primary stated objectives of demonetisation.

Statement (C) — that demonetisation led to the tax administration channelising savings into the formal financial system — is also accurate. The sudden invalidation of high-value notes pushed people to deposit cash into banks, bringing previously unaccounted money into the formal system, helping to widen the tax base and increasing financial savings held in banks. …

When the Prime Minister announced the demonetisation policy late in the evening of November 8, 2016, the core legal change was straightforward: the existing ₹500 and ₹1000 currency notes would no longer be accepted as valid money for transactions. The term "legal tender" is crucial here. It means money that must be accepted if offered in payment of a debt. Once demonetised, these notes lost that status—shops, businesses, and individuals were no longer legally required to accept them.

The government did provide a narrow set of exceptions for the first few days. People could still use the old notes at government hospitals, for buying petrol and diesel at fuel stations, for paying utility bills, and for a handful of other essential services. This grace period was meant to cushion the immediate shock, especially for those who had no other cash on hand. But these exceptions were temporary and tightly defined.

The primary channel for dealing with the demonetised currency was deposit or exchange at banks and post offices. Citizens were given a window—initially until December 30, 2016, later extended to March 31, 2017 for deposits only—to deposit their old notes into bank accounts or exchange them for new currency, subject to daily limits. This was the government's mechanism to bring unaccounted cash into the formal banking system and to replace the old notes with newly designed ₹500 and ₹2000 notes.

The question refers to one of the most significant economic events in modern Indian history — demonetisation. On the evening of 8th November 2016, Prime Minister Narendra Modi announced in a televised address that currency notes of ₹500 and ₹1000 from the old Mahatma Gandhi series would cease to be legal tender from midnight. This meant that these notes could no longer be used for any transactions, whether buying goods, paying bills, or settling debts.

The stated objectives of this move were to curb the circulation of black money, reduce the use of counterfeit currency, and push the economy towards a more digital and formal system. The old notes could be deposited in banks or exchanged for new ones within a specified window, but the sudden withdrawal of high-value currency caused widespread disruption, especially in cash-dependent sectors like agriculture, small trade, and daily wage labour.

Now, looking at the options given in the question:

• (A) ₹50 and ₹100 — These were never banned. They remained legal tender throughout. …