As the Government has declared that currency notes of Rs. 500 and Rs. 1,000 denominations will not be valid from midnight of November 8, 2016, citizens will have to surrender the old notes at any branch of a bank or post office.

Citizens will have a time limit of 50 days (till 30 December, 2016) to either replace the old notes with new ones or deposit the same into their bank or post office accounts. The limit for exchanging the old notes with new ones is set at Rs. 4,000. However, there is no such limit for depositing the old notes into bank or post office account. In other words, a person can deposit the old notes into his bank or post office account without any limit.

Various provisions of Income-taxAct would play a vital role in achieving the objectives of this move to curb the black money as under:

1. Furnishing of PAN  while depositing cash in Bank

As per section 139A of the Income-tax Act, 1961 read with Rule 114B of the Income-tax Rules, 1962, PAN is mandatory if a person wants to deposit cash of more than Rs. 50,000 into his bank account during any one day. Hence, a person who doesn’t have PAN won’t be able to deposit cash of more than Rs. 50,000 into his account

2. Furnishing of information by Bank / Post office to Income-tax Department regarding Cash Deposit

As per section 285BA of the Income-tax Act, 1961, every bank or post office is required to furnish a statement of financial transaction or reportable account (commonly known as ‘Annual Information return’) to Income-tax department in respect of cash depositmade by a person aggregating to Rs. 10 lakh or more in a financial year, in his one or more accounts. The limit is Rs. 50 lakh in case of current account.

Hence, Banks or post offices pass information to income-tax department in respect of every person who deposited cash of more than Rs. 10 lakh in his accounts during a financial year.

Hence, it is quite possible that on basis of information received from banks or post offices, Income-tax department may furnish notices to persons depositing cash of more than Rs. 10 lakh to explain the source of such deposit.

3. Penalty for concealment or misreporting of income on failure to disclose source of Income from which Cash Deposited

As per section 271(1)(c) of the Income-tax Act, a taxpayers is penalized if he conceals or furnish inaccurate particulars of his income. The penalty under section 271(1)(c) ranges between 100% to 300% of the tax sought to be evaded.

Section 271(1)(c) was substituted by section 270A by Finance Act, 2016 which provides for the penalty in case of misreporting or under reporting of income. The penalty is 50% of the tax payable on under-reported income and 200% of the tax payable on misreported income.

Hence, if a person fails to disclose the source of the amount deposited in bank or post office account, he can be penalized under section 271(1)(C) or Section 270A, as the case may be.\

4. Unexplained Credit and Cash Deposit

Section 68 of the Income-tax Act, 1961  provides that where any sum is credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of that assessee. Read Cash deposits in saving bank account held as unexplained

5.  Cash Payments not Allowed

As per Section 40A(3) of income tax Act, Cash payments by businessmen not allowed exceeding Rs 20000 except as provided in Rule 6DD. Read More 40A(3) –Cash Payments not Allowed

6. No Repayment of Loan / Deposit or Advance in Cash Exceeding Rs 20000

Section 269T of Income Tax Act provides that any loan or deposit or specified advance shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the person specified in the said section, if the amount of such loan or deposit or specified advance is twenty thousand rupees or more. Read Post No repayment of Loans or deposits or advance in cash >Rs 20000

7. No Acceptance of loan or Deposits in Cash exceeding Rs 20000

Section 269SS of the income tax provided that  No person shall take or accept from any other person  any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if, aggregate amount exceeds Rs 20000. Read No Loan or Deposits or advances in cash >Rs 20000

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1. Why is this scheme introduced?

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.

2. What is this scheme?

The legal tender character of the existing bank notes in denominations of ₹500 and ₹1000 issued by the Reserve bank of India till November 8, 2016 (hereinafter referred to as Specified Bank Notes) stands withdrawn. In consequence thereof these Bank Notes cannot be used for transacting business and/or store of value for future usage. These Bank Notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any Head Post Office or Sub-Post Office.

3. How much value will I get?

You will get value for the entire volume of notes tendered at the bank branches / RBI offices.

4. Can I get all in cash?

No. You will get upto ₹4000 per person in cash irrespective of the size of tender and anything over and above that will be receivable by way of credit to bank account.

5. Why I cannot get the entire amount in cash when I have surrendered everything in cash?

The Scheme does not provide for it, given its objectives.

6. ₹4000 cash is insufficient for my need. What to do?

You can use balances in bank accounts to pay for other requirements by cheque or through electronic means of payments such as Internet banking, mobile wallets, IMPS, credit/debit cards etc.

7. What if I don’t have any bank account?

You can always open a bank account by approaching a bank branch with necessary documents required for fulfilling the KYC requirements.

8. What if, if I have only JDY account?

A JDY account holder can avail the exchange facility subject to the caps and other laid down limits in accord with norms and procedures.

9. Where can I go to exchange the notes?

The exchange facility is available at all Issue Offices of RBI and branches of commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.

10. Need I go to my bank branch only?

For exchange upto 4000 in cash you may go to any bank branch with valid identity proof.

For exchange over 4000, which will be accorded through credit to Bank account only, you may go to the branch where you have an account or to any other branch of the same bank.

In case you want to go to a branch of any other bank where you are not maintaining an account, you will have to furnish valid identity proof and bank account details required for electronic fund transfer to your account.

11. Can I go to any branch of my bank?

Yes you can go to any branch of your bank.

12. Can I go to any branch of any other bank?

Yes, you can go to any branch of any other bank. In that case you have to furnish valid identity proof for exchange in cash; both valid identity proof and bank account details will be required for electronic fund transfer in case the amount to be exchanged exceeds ₹4000.

13. I have no account but my relative / friend has an account, can I get my notes exchanged into that account?

Yes, you can do that if the account holder relative/friend etc. gives you permission in writing. While exchanging, you should provide to the bank, evidence of permission given by the account holder and your valid identity proof.

14. Should I go to bank personally or can I send the notes through my representative?

Personal visit to the branch is preferable. In case it is not possible for you to visit the branch you may send your representative with an express mandate i.e. a written authorisation. The representative should produce authority letter and his / her valid identity proof while tendering the notes.

15. Can I withdraw from ATM?

It may take a while for the banks to recalibrate their ATMs. Once the ATMs are functional, you can withdraw from ATMs upto a maximum of ₹2,000/- per card per day upto 18th November, 2016. The limit will be raised to ₹4000/- per day per card from 19th November 2016 onwards.

16. Can I withdraw cash against cheque?

Yes, you can withdraw cash against withdrawal slip or cheque subject to ceiling of ₹10,000/- in a day within an overall limit of ₹20,000/- in a week (including withdrawals from ATMs) upto 24th November 2016, after which these limits shall be reviewed.

17. Can I deposit Specified Bank Notes through ATMs, Cash Deposit Machine or cash Recycler?

Yes, Specified Bank Notes can be deposited in Cash Deposits machines / Cash Recyclers.

18. Can I make use of electronic (NEFT/RTGS /IMPS/ Internet Banking / Mobile banking etc.) mode?

You can use NEFT/RTGS/IMPS/Internet Banking/Mobile Banking or any other electronic/ non-cash mode of payment.

19. How much time do I have to exchange the notes?

The scheme closes on 30th December 2016. The Specified banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI till 30th December 2016.

For those who are unable to exchange their Specified Bank Notes on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the RBI, along with necessary documentation as may be specified by the Reserve Bank of India.

20. I am right now not in India, what should I do?

If you have Specified banknotes in India, you may authorise in writing enabling another person in India to deposit the notes into your bank account. The person so authorised has to come to the bank branch with the Specified banknotes, the authority letter given by you and a valid identity proof (Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff)

21. I am an NRI and hold NRO account, can the exchange value be deposited in my account?

Yes, you can deposit the Specified banknotes to your NRO account.

22. I am a foreign tourist, I have these notes. What should I do?

You can purchase foreign exchange equivalent to ₹5000 using these Specified Bank Notes at airport exchange counters within 72 hours after the notification, provided you present proof of purchasing the Specified Bank Notes.

23. I have emergency needs of cash (hospitalisation, travel, life saving medicines) then what I should do?

You can use the Specified Bank Notes for paying for your hospitalisation charges at government hospitals, for purchasing bus tickets at government bus stands for travel by state government or state PSU buses, train tickets at railway stations, and air tickets at airports, within 72 hours after the notification.

24. What is proof of identity?

Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff.

25. Where can I get more information on this scheme?

Further information is available on our website (www.rbi.org.in) and the website of the Government of India (www.finmin.nic.in)

26. If I have a problem, whom should I approach?

You may approach the control room of RBI by email or on Telephone Nos 022 22602201/022 22602944

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