Government from yesterday mid-night that’s 8th November 2016 declared circulation of old currency note of Rs 500 and Rs 1000 denomination as illegal, meaning there by will not be accepted as legal tender so the business man should refrain from accepting these bane currency notes from mid-night of 8th November 2016.
However there is no need to panic for the general public they can replace their old currency note against new currency note Rs 500 and Rs 2000 from the banks as well as from post office.
While getting the old currency notes replaced the person will have to produced identity proof to the bank or post office authority.
The small withdrawal limit of exchange of old note with new once is set at Rs 4000 to start with which will eventually increase as the circulation of new note by RBI establishment.
Instead of withdrawing or replacing of currency the person can deposit his legitimate fund in old currency note in his bank account or post office saving account.
However following document and point should be kept in mind:-
1) Furnishing of PAN number as per sec.139A read with rule 11(4)b is mandatory for depositing cash more than Rs 50000 in a single day in a saving account.
2)Bank and post office are required to furnish statement of financial transaction in annual information report to income tax department in relation to cash deposits made by a person aggregating Rs. 10 lakh or more in a year in his one or more accounts, however this limit of cash deposit in current account is Rs. 50 lakh. So the cash from the non source deposited in these accounts will have to be explained to Income Tax Department, since there is high probability that income tax department will issue scrutiny notices to these persons. Hence person depositing cash in account should be prepared to explain source of the cash.
3) Penalty the cash deposit in the bank account of old currency if the tax payer is unable to explain the source of cash he may be panelized, which according to sec. 270A where there is under reporting it is 50% of the tax payable or 200% of the tax payable for the misreporting of income.
So the person having old currency notes of the denominate of Rs 500 and Rs 1000 need not panic they can get it replaced for small quantity or having legitimate business receipts till 8th Nov 2016 can deposit the same in bank account and use their money at will.
I personally appreciate the step taken by government to eradicate the circulation of black money in the market through this far reaching step, however it has to be monitored carefully that, people should not divert the ill-gotten money through other smart ways of tax planning or converting into gold jewelry etc kind of articles.
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