"By just depositing it (unaccounted money), you don't avoid the responsibility of paying tax," he said when asked about surge in deposits in banks following withdrawal of high denomination currency notes.
He further said the income tax department is keeping an eye on such deposits.
As per RBI, about Rs 8.45 lakh crore in scrapped Rs 500 and 1,000 notes were deposited with banks by November 27.
The Lok Sabha has amended the Income Tax Act to provide for higher tax and penalty on such undisclosed income. The Bill is pending in the Rajya Sabha.
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Replying to a question of long queues for withdrawal of cash at banks, the finance minister said RBI has increased the supply of new Rs 500 notes and asserted that the situation will improve soon.
(REOPENS DEL 45)
Meanwhile, various states expressed their concern about demonetisation impacting their revenue.
West Bengal Finance Minister Amit Mitra said the currency is something to do with revenue of states.
According to Kerala Finance Minister Thomas Isaac, the Centre's decision to demonetise old Rs 500 and 1,000 notes a "national calamity" which has put the nation in a turmoil.
"Probably GDP number may be negative in the third quarter. GDP growth will be low, tax collection of states and the Centre will be low and it will affect social programme," Mitra said.