During his address to the nation on 8th November 2016, PM Narendra Modi highlighted the two problems that the country is currently facing, terrorism and corruption. These two issues converged to the point of money, counterfeit currency promoting the former one and black money causing the latter one. He announced a single measure to tackle this problem, the ₹500 and ₹1,000 notes ceased to be legal tenders from the inception of 9th November 2016. They will be replaced by new ₹500 and ₹2,000 currency notes.
Here are the key takeaways-
- Old currency can be deposited in the banks and post offices from 10th November 2016 to 30th December 2016 without any limit.
- Old currency can be exchanged for valid one at banks from 10th November 2016 to 30th December 2016. The limit for such exchange is ₹4,000 till 24th November 2016. This limit will be enhanced after the period.
- Those people who fail to exchange the currency by 30th December, they will be given another time period up to 31st March 2017 to exchange their old currency from special exchange counters at RBI. These individuals are required to submit a declaration form along with their amount.
- ATMs will be closed on 9th of November and in some cases, 10th of November.
Amount of ₹2,000 can be withdrawn per day per card and the limit will be enhanced to ₹4,000 in the coming days.
- Branch withdrawal limit has been fixed at ₹10,000 per day and ₹20,000 per week.
- Banks were closed on 9th of November, which enabled them to cope up with the changes being brought about.
- Tourists have been given the option to exchange their old currency notes till 11th November 2016 at airports. The limit for such exchange is ₹5,000.
Various short-term respites have been announced. The now defunct currency of denominations of ₹500 and ₹1,000 can be used up to 11th November 2016 in following mentioned cases-
- Government hospital and dispensaries, on presenting a valid prescription from any doctor.
- Air, bus and railway tickets.
- Government cooperatives and milk booths.
- Fuel Pumps.
This decision has brought about turbulence in the economy, and following after-effects are expected to be felt owing to this step-
- Real estate sector is expected to take the hardest hit from this decision. The property rates are expected to slide down over coming months.
- Gold trade is also expected to hit a speed bump. Despite that, traders welcomed this decision as in the bigger picture, it will bring about positive impacts.
- This decision comes as late Diwali gift for the e-payment players in the market as their user base is expected to expand exponentially in coming days.
Features of the new note-
As per the tweets by the RBI, the following are the key highlights of the new currency that is being issued in lieu of the old ones.
A day after the decision was made, following clarifications were also issued-
- Banks to remain open on Saturday and Sunday this week to handle the pressure that they will face regarding deposits, exchange, and withdrawals. This will also make it convenient for the general public as they will get more days for exchange and deposits.
- Deposits made between 10th November and 30th December shall be kept under the eye and those deposits in excess of matching income as per ITRs shall come under the scrutiny of ITOs.
- Deposits up to ₹2-2.5 lacs are less likely to come under scrutiny, so as to give relief to small artists and housewives, who have kept that money as their savings in their homes. They need not worry about such deposits as any income that can be accounted for will not be penalized. Savings don’t qualify as black money.
- Deposits in excess of declared income will be considered as tax evasion and penalty up to 200% of tax, along with tax can be levied on such amounts.
- All the transactions involving gold cannot be made without PAN. Any dealer who sells gold without PAN will be penalized.
- Delhi Metro will accept old notes of ₹500 and ₹1,000 up to Saturday i.e. 12th November.