What if you burn your 1000 Rs Note? What will be the effect on Indian Government. Does India gets poor by thousand rupees?

I promise to pay the bearer the sum of five hundred rupees


1000 rs note

This sentence written on the note states the fact that note is a promise or liability for the government to pay the value equivalent to the 1000 Rs if you hand over the note to RBI.

The actual value of note is around 3 rupees, which is nothing as compared to the promise on the note.

If you decided to burn the thousand rupees note which is earned by you by working hard. You will be destroying the value you have and that value is around 996. The governor of RBI is no longer liable to pay you that value you burt down. So the governor gets richer by 996 rupees.
The governor of RBI is infact the servant of government. Thus the government gets richer by 996 Rs.

Thus you gets poorer by 1000 Rs and the government get richer by 996 Rupees.

Now let us consider the aspect of taxes. Since you have to declare your annual income you still have to pay the same tax. Thus government does not loose anything but you will get further poorer by paying the tax for the money you burnt. The tax will be lets say say 20% [this tax depends on the total income you. 10% is just for demonstration purpose].

So you will get poorer by 1000 Rs plus the tax you will pay on that 1000 Rs.

Final conclusion- Government get richer by 996 and you will get poorer by 1000 Rs plus the tax you pay on that.

There may be many other aspect hidden like circulation, inflation, reprinting of the money and more. Do explore and comment to make others aware. 

Important points to consider:

  1. This promise is present on all notes except the 1 rupees note.
  2. Government can loose few of taxes and few points as you have to pay taxes in multiple forms.

Gaurav Yadav

Gaurav is cloud infrastructure engineer and a full stack web developer and blogger. Sportsperson by heart and loves football. Scale is something he loves to work for and always keen to learn new tech. Experienced with CI/CD, distributed cloud infrastructure, build systems and lot of SRE Stuff.

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