The existing notes of Rs.1,000 and Rs.500 have been withdrawn from the market. These notes were issued by the Reserve Bank of India. On and from November 8, 2016, these currency notes have been withdrawn. So, these currency notes cannot be used for business transactions any longer. The Rs.1,000 and Rs.500 notes can only be deposited or exchanged at all the Reserve Bank of India offices spread across India. The notes can also be deposited at all the commercial bank branches, rural banks, co-operative banks and post offices.
PAN Card and Demonetization
The Income Tax department has made it very clear that post demonetization of old Rs.1,000 and Rs.500 notes it is mandatory to quote PAN for cash deposits amounting to Rs.2.5 lakh or more.
If you wish to deposit an amount of Rs.50,000 in one day in a cooperative or scheduled bank, you will have to quote your PAN. This particular additional need of quoting PAN card is made mandatory so that black money or ill-gotten wealth does not get converted to white money during this 50 day phase allowed by the Government of India to deposit the invalid notes in the bank accounts.
The department of Income Tax also stated that according to the CBDT amendment, apart from quoting PAN for cash deposits of Rs.50,000 in one day, individuals will have to quote PAN for cash deposits that sum up to Rs.2.5 lakh or more. This has been mandated on and from November 9, 2016 to December 30, 2016. Along with this, quoting PAN is absolutely necessary when you want to buy pay orders and bank drafts. PAN is also required for purchasing banker’s cheques that amount to Rs.50,000. Any fixed deposit with a post office or a bank requires PAN to be quoted. Also, if you wish to open an account (except basic deposit account and Jandhan account), you must quote the PAN.
The CBDT or Central Board of Direct Taxes stated that 25 crore PAN cards have already been issued by them. On November 8, 2016, the Government of India announced that all the old Rs.1,000 and Rs.500 currency notes are invalid. This was done to stop corruption and make all black money invalid. Everyone crowded around the banks to deposit all the old currency notes they had. The Government, on the other hand, put restrictions in order to avoid the black money from being converted to white money and only the genuine holder of old notes could exchange them in their banks.
The Government directed all the post offices and banks to send reports of deposits above Rs.2.50 lakh in the savings accounts to the Income Tax departments. According to a notification from the Indian Government, all the cooperative banks, regular banks and post offices must report the department of IT about both Rs.50,000 deposited in a day and Rs.2.50 lakh or more into savings accounts deposited within November 9, 2016 and December 30, 2016.
Why has Demonetization been introduced?
An increase in circulation of fake Indian currency notes has been noticed lately. For the ordinary people, fake notes look exactly like the real currency notes. However, no security features are copied to the fake notes. These fake currency notes are used for illegal and anti-national activities. The high denomination notes are misused by the terrorists. They are also used for hoarding black (illegal) money. As India is a country that runs mostly on cash, the circulation of fake notes has become a menace to the society. In order to control this particular situation, the demonetization scheme has been introduced by the Government of India.
Withdrawal for Ward’s wedding
With a view to allow the common people to celebrate and perform their ward’s wedding, the Government of India has decided that Rs.2,50,000 can be withdrawn till December 30, 2016. This money can be used to meet all the wedding expenses. The withdrawals are subject to following conditions:
- Withdrawals are allowed from fully KYC compliant accounts.
- If the date of marriage is on or before December 30, 2016 then the amount can be withdrawn.
- Either of the parents can withdraw the amount for their ward’s wedding. However, only one of them can withdraw the amount.
Banks might keep evidence of the wedding (invitation card, advance payment receipts, etc.) and furnish them for verification later. Banks must also encourage the families to go for non-cash modes of transactions for wedding purposes. These include payments through credit cards, debit cards, cheques, drafts, internet banking, mobile channels, NEFT, RTGS, IMPS, etc.
Steps Take for the Farmers
The farmers can withdraw an amount of Rs.25,000 every week from their deposit accounts. They can also avail a loan of the same amount or use their Kisan Credit Card. The amount can be used to purchase seeds from centres, outlets or units belonging to the State Governments and Central Government, State and Central Agricultural Universities, State and National Seed Corporations, Indian Council of Agricultural Research, etc.
Cash credit limits of NABARD will be utilized during the Rabi crop season so that the farming operations can run without any hindrance. Banks that have adequate supply of cash have been requested to supply RRBs and DCCBs constantly. In order to facilitate smooth procurement, adequate cash will be given to the bank branches in APMCs.
Making use of the Electronic Mode
Internet Banking, Mobile Banking, IMPS, NEFT, RTGS, etc. can be used to avoid cash payments. To meet all the transactional needs a few additional measures have also been introduced. The PPI (Prepaid Payment Instruments) issuer can issue Prepaid. Payment Instruments to the merchants. Balance in the Prepaid Payment Instruments cannot be more than Rs.20,000 at any given time. The merchants can send amounts of Rs.50,000 (maximum) to their own accounts from the Prepaid Payment Instruments.
Semi closed Prepaid Payment Instruments limit has gone up from Rs.10,000 to Rs.20,000. The reload value has also been increased to Rs.20,000. Full KYC Prepaid Payment Instruments with balance of Rs.1,00,000 can be made available by the authorized Prepaid Payment Instruments issuers. The measures will be in effect till December 30, 2016.
Emergency Cash Needs
Up to December 15, 2016, specific banknotes of Rs.500 can be used for the following:
- For clearing payments for medical treatments and pharmacies at Government hospitals.
- At the railway ticket counters, Public Sector or Government bus ticket counters and flight ticket counters.
- For buying things from cooperative stores that are run by Central Government or State Government. However, a maximum purchase of Rs.5,000 is allowed at one time from the Consumer Cooperative Stores.
- For purchase of milk at the milk booths that are run by the State Government or Central Government.
- For purchase of diesel, petrol and gas at the fuel stations that are operated by Public Sector Oil and Gas Marketing organizations.
- For making payments at burial grounds.
- For LPG cylinder purchase.
- For making payments to on board catering service during train travel.
- For making payments towards pharmacy as prescribed by the doctor in the prescription.
- For buying tickets of metro and suburban rail services.
- For purchasing tickets for any monument that is maintained by Archaeological Survey of India.
- For clearing fees, taxes, charges and penalties.
- For payment of fees in State Government Colleges or Central Government Colleges.
- For prepaid mobile recharge up to limit of Rs.500 per recharge.
Withdrawing Cash against Cheque:
Withdrawing cash against Cheque is allowed. However, the weekly limit stands at Rs.24,000. This includes over the counter and ATM withdrawals too. All the business entities that have Current Accounts that are active for the last 3 months are allowed to withdraw an amount of Rs.50,000 every week.
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Frequently Asked Questions on Demonetization
- Does the demonetization scheme apply to pre 2005 currency notes of Rs.1,000 and Rs.500?
The SBN (Specified Bank Notes) include Rs.1,000 and Rs.500 currency notes that were issued before 2005. The banks should accept all the currency notes of Rs.1,000 and Rs.500 that are issued before that year. However, the exchange of these notes can take place only at the Reserve Bank of India.
- How much value can I avail?
You can avail the entire value that you submit at the Reserve Bank of India offices or various bank branches.
- Can I avail the entire amount in cash?
The scheme has strict objectives. The balances that you have in your bank account can be used to make payments using Cheque. Electronic modes can also be used to transact amounts. The electronic modes include mobile wallets, internet banking, credit cards, debit cards, IMPS, etc.
- What if I do not hold any account with any bank?
You can always choose to open an account with a bank by approaching one of its branches with all the necessary documents.
- Can I withdraw money from the ATMs?
The Automated Teller Machines are getting recalibrated progressively. Such ATMs will offer a cash limit of Rs.2,500 every day when they are recalibrated. This will allow lower denomination notes to be dispensed. Unless all the bank ATMs are not calibrated, they will continue to dispense Rs.2,000 notes.