Taking the nation by surprise, Prime Minister Narendra Modi on Tuesday announced that the bank notes in the denominations of Rs 500 and Rs 1,000 will not be legal tender from midnight of November 8, 2016. The old currency notes can be exchanged for value at the Reserve Bank of India or at any bank branch or at any Head Post Office or Sub-Post Office.
You can deposit the cash in your possession and get it exchanged for new notes, but there is a catch. It’s not as simple as its sounds as depositing cash in the bank may not get you any relief from tax.
If you deposit an amount of up to Rs. 2.5 laks, then you will get the same value of notes exchanged by credit in your bank account, but if your cash deposit amount exceeds Rs 2.5 lakh, then you are more likely to attract scrutiny. If you deposit an amount above Rs. 2.5 lakh in your bank which does not match your declared income, then it will be considered as a tax evasion case. In such a case, cash deposits above Rs. 2.5 lakh will be imposed with tax plus a penalty of 200 percent as per the section 270(A) of the income tax act.
The citizens are allowed to deposit old currency notes of Rs 500 and Rs 1000 denominations between November 10 and December 30, 2016. Small businessmen, workers, farmers and housewives need not worry about amount up to Rs. 2 lakh as it would be below taxable income. If your cash deposit is legally earned or previously withdrawn from bank and had been already disclosed, then must not worry about it. However, those with a lot of bank notes in their possession may have to face some serious troubles.
Citizens depositing large amounts of cash till December 30, will have to furnish the details of PAN card at the bank. Similarly, jewelers have also been instructed to keep PAN details of people buying jewelry with cash.