Rs. 500 and Rs. 1,000 No Longer Legal Tender

By BankBazaar | November 9, 2016

Rs. 500 and Rs. 1,000 No Longer Legal Tender

Prime Minister Narendra Modi, in a televised broadcast to the nation introduced a sweeping financial reform late evening on 8th November, 2016. If this has you in a fix – don’t panic. The Government’s got things all sorted out. If you find that you’ve got a few bundles of Rs. 500 and Rs. 1,000 notes stashed away under your mattress, and you want to know what to do next, here’s what you should know.

Goodbye, Rs. 500 & Rs. 1,000

In a bid to curb the spread of illegal financial practices, the Reserve Bank of India has announced a big change to Indian currency. These changes will impact the high denomination currency notes. The RBI has demonetised the Rs. 1,000 currency notes with effect from midnight of 8th November, 2016. These notes and the existing Rs. 500 currency notes are no longer legal tender.

This comes in the wake of the recent Income Declaration Scheme 2016, an initiative through which individuals were encouraged to disclose any amounts of black money they held.

Additional Reading: Income Declaration Scheme: Why You Should Declare Your Undisclosed Income Right Now

Reports from the RBI reveal that the amount of counterfeit currency in the denominations of Rs. 500 and Rs. 1,000 were relatively higher in comparison to other denominations.

Why the sudden change in the currency?

As there were excessive numbers of counterfeit notes in circulation of the Rs. 500 denomination, the Reserve Bank announced that new Rs. 500 notes will be issued by banks with effect from 10 November 2016. Circulation of the Rs. 1,000 currency note, meanwhile, will cease forthwith.

Additional Reading: How GST Will Fight Black Money Generation

Here is everything you need to know about the new changes to the currency.

A Brand-New Rs. 500 Note

The new Rs. 500 currency note is a shade of stone grey and differs considerably from the previous notes in size, location of security features, and theme. The new notes will feature an image of the Red Fort.

A New Currency Denomination

The Reserve Bank of India has introduced a new denomination to Indian currency with the roll out of the Rs. 2,000 note. This new note is a shade of magenta, featuring ISRO’s ‘Mangalyan’ on the reverse, in a celebration of the country’s first exploration of interplanetary space.

What happens now?

In the wake of this major reorganisation of the country’s currency notes, here’s how the common man will be affected.

To recalibrate their ATM machines and prepare to issue the new notes to the general public, all banks across India will remain closed on 9th November, 2016 and in some places on 10th November 2016 too.

ATMs nationwide will also remain non-functional on 9th November, 2016 and in some places on 10th November 2016.

Withdrawal limits

ATM withdrawals: Withdraw up to Rs. 2,000 per day per card between November 10th and 18th. Withdrawals up to Rs. 4,000 per day per card will be permitted from the 19th of November onwards.

Cheque/Withdrawal slip: Withdraw up to Rs. 10,000 per day and an overall limit of Rs. 20,000 per week (including ATM withdrawals) up to 24th November.

Additional Reading: A Must Read If You’re Headed To An ATM/Bank For Cash!

What You Can Do

Deposit your cash

Between 10th November, 2016 and 30th December, 2016, you can deposit all your old notes of Rs. 500 and Rs. 1,000 denominations in your bank or a Post Office account. There is no limit on the amount you can deposit.

In the initial days, there will be a limit of Rs. 10,000 per day and Rs. 20,000 per week on withdrawals. This might be increased in later days. Remember that this includes both cheque/withdrawal slip and ATM withdrawals.

Exchange your money

You still have time to exchange your old currency for new currency at the banks or Post Offices, provided you have a valid Government ID like a PAN, Aadhaar, or Election Card to show them. Keep in mind that there is a daily exchange limit of Rs. 4,000 up to 24th November 2016. The Old High Denomination banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI.

In case of emergencies

The old currency notes will be accepted within 72 hours of the RBI notification at hospitals, for bus tickets, travel on state government buses or state PSU buses, train tickets at railway stations, and for air tickets at airports.

When do you get the new currency notes?

The new design series of the currency notes will be issued to the general public from 10th November, 2016.

Still got questions?

We will try to answer a few.

What value will I get for my money?

You will get the entire value of the tender exchanged at the bank or Post Office.

What happens if I want to exchange more than Rs. 4,000 in a day?

In this case, you can get up to Rs. 4,000 in cash and the remaining amount will be put into your bank account.

I need more than Rs. 4,000 for my needs.

For any expenses exceeding Rs. 4,000, you can use other means of payment such as cheques, Debit or Credit Cards, or bank transfers. Remember, the cap on the withdrawal limit is only temporary.

Additional Reading: All About Money Transfers: NEFT, RTGS and IMPS Explained

My maid doesn’t have a Savings Account and she’s been paid in Rs. 500 and Rs. 1000 denominations. What can she do?

You can assist your maid with opening a bank account. In fact, the Government has even made provisions for lower-income groups to have zero-balance accounts through the Jan Dhan Yojna Scheme. Please note, this account will be subject to the caps and limits that have been laid down.

Do I need to go to my own bank branch or can I go to any other branch?

You can go to any bank branch with valid ID proof, to exchange notes within the prescribed daily limits.

I have no bank account but my relative / friend has an account. Can I get my notes exchanged into that account?

Sure. If your friend or relative gives you written permission to exchange currency notes through their bank account, you can do so by providing the bank with written proof of permission when making the exchange. You will need to show your own valid ID proof too.

Do I need to go to the bank in person or can I send the notes through my representative?

It is advisable that you visit the bank personally to make the exchange or deposit. However, if you cannot do so, you can send the notes through your representative with a written authorisation letter mentioning the denominations to be exchanged or deposited. This authorisation must be accompanied by an attested copy of your ID proof. Your representative must also carry his own valid ID proof to furnish at the bank.

I am not in India at the moment. What should I do?

If you have Old High Denomination currency notes in India, but are not in the country at present, you can give a written authorisation letter to allow another person in the country to deposit the notes in your bank account. Your representative must produce this authorisation letter and valid ID proof to make the deposit on your behalf.

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

Non Resident Indians (NRIs) can deposit the old currency notes into your NRO account.

Additional Reading: NRE vs NRO: What’s The Difference?

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

Foreign tourists who are presently in the country can buy forex equal to a sum of Rs. 5,000 using the old currency notes. This can be done at airport foreign exchange counters within 72 hours of the RBI notification. Remember, you will need to produce proof of having bought the old currency notes.

What valid ID proof can be shown at the bank?

Banks will consider any of the following as valid ID proof: Aadhaar Card, Driving License, Voter ID Card, Passport, NREGA Card, PAN Card, Identity Card issued by government departments or Public Sector Units to its staff.

What do I do with my black money?

Sorry, your luck’s run out. ROFL.

Beware!

If you are depositing a sum of money above Rs. 2.5 lakh between 10th November and 30th December 2016, you could be taxed on the deposit. In case there is a mismatch in your income, you could be liable to pay a hefty penalty of 200%. The government has let it be known that they will receive reports of cash deposits over Rs. 2.5 lakh in every account.

The IT Department will match the deposits with the depositor’s tax returns. Remember, any mismatch will be considered as a case of tax evasion.

Depositors who have been caught for a mismatch will need to pay the tax and penalty as per Section 270(A) of the Income Tax Act.

Small businessmen, housewives, workers, artisans and housewives need not worry about scrutiny from the tax department if they deposit small amounts of money. The permissible tax limit is up to Rs. 2 lakh.

Buying Gold?

If you’re considering the thought of buying jewellery, take your PAN Card to the showroom. You will be required to furnish your PAN details for all jewellery purchases.

Some Good News

All banks across the country will remain open on 12th and 13th November 2016 to allow the general public to exchange or deposit the old Rs. 500 and Rs. 1,000 currency notes. You will need to submit an exchange request slip with valid identity proof and the name of your bank and branch.

Wait. We have more to say on the new currency.

The Rs. 1,000 currency notes will come back after a fashion with better security features, in a different colour. Yay!

While the lower denomination currency notes of Rs. 100 and Rs. 50 will continue to be legal tender, a new series of these notes featuring a new design is expected in the coming months with enhanced security features.

On a closing note, here’s what Adhil Shetty, CEO & Co-Founder, BankBazaar has to say about the move to do away with the Rs. 500 and Rs. 1,000 currency notes.

This is a bold move by the government to scrap the existing Rs. 500 and Rs. 1000 rupee notes. We are confident that the move will cut down the menace of fake currency as well as reduce black money in circulation. This will add a great deal more liquidity to the formal banking system, which will benefit immensely from the legal flow of liquid cash. This is the right time to go #cashless, as it is both highly transparent and accountable, making life easy for the government and the common man.

Updates

Wedding Preparations Underway? Need Access To Your Finances?

If you have a wedding on the cards in the near future and require easy access to your finances following the recent demonetisation of the Rs. 500 and Rs. 1,000 notes, this may be music to your ears. It has been announced that one family member can withdraw a sum amounting to a maximum of Rs. 2,50,000 to meet necessary wedding expenses. This directive comes following reports that many families are facing difficulties because of the imposition of the Rs. 25,000 withdrawal limit.

Exchange Limits Reduced

Banks are expected to reduce the exchange limit on old currency notes of Rs. 500 and Rs. 1,000 denominations. The currency exchange limit will be decreased from Rs. 4,500 to Rs. 2,000 from 18th November 2016. The government has also announced that people coming in to exchange notes at banks will be marked with indelible ink to deter repetitive exchanging of currency by the same people.

Withdrawal Limits Increased 

In an attempt to facilitate convenient withdrawals and deposits of the old currency notes, the Government has increased the withdrawal limit which was imposed earlier. Now you will be allowed to withdraw a sum of Rs. 2,500 per day from the recently recalibrated ATMs.

The new Rs. 2,000 notes are expected to be available in the ATMs from the week of 14th November 2016.

The daily over-the-counter withdrawal amount has also been increased to Rs. 4,500. The weekly withdrawal limit has been revised to Rs.24,000 per week.

If you have a business with a Current Account that has been active for more than three months, you are in luck – you can withdraw up to Rs. 50,000 per day.

Two-Much Of Two Thousand

For those who are tired of seeing the new Rs. 2,000 note and not knowing how to spend it because retailers are unwilling to accept this high denomination, here’s some good news. The new Rs. 500 currency note has been introduced. Fingers crossed that you may get your hands on a few notes soon!

Micro-ATMs

Banks have also been advised to introduce mobile ATMs – better known as micro-ATMs which will dispense cash on Credit or Debit Cards.

Additional Reading: Cash Crunch? Go To A Micro-ATM

Old Notes For Emergency Expenses

In an extension of the 72 hours deadline after the RBI notification regarding the demonetisation, old notes of Rs. 500 and Rs. 1,000, denominations will be accepted at airports, petrol pumps, toll booths, pharmacies and railway stations until 24th November.

More Updates

Depositing unaccounted money after demonetization? Prepare to pay 60% in tax

A new amendment to the Income Tax law has been recently approved by the Union Cabinet. High value deposits of unaccounted old Rs. 500 and Rs. 1,000 currency notes that exceed the deposit limit of Rs. 2,50,000 after the November 8th deadline will make depositors liable to pay 60% in taxes. This is 30% towards tax and an additional 30% as penalty. This 60% tax slab is higher than the 45% slab levied under the recently concluded Income Declaration Scheme (IDS).

No more exchange of Rs. 500 and Rs. 1,000 notes at banks

It has recently been announced that banks will no longer exchange the old Rs. 500 and Rs. 1,000 currency notes over-the-counter after midnight on 24th November. The exchange of notes was previously permitted until 30th December 2016. However, cash deposits of the old currency notes will be allowed until 30th December.

Foreign citizens will be permitted to exchange foreign currency upto Rs.5,000 per week

The Reserve Bank of India has announced that foreign citizens in the country will be permitted to exchange foreign currency upto Rs. 5,000 per week. The details of such exchange will be duly recorded in their Passports.

Toll exempted on highways until 1st December

To ease the currency crunch faced by the people across the country, the government has decided to extend the deadline for exemption of toll on the national highways. Travellers will be exempt from paying toll at highway checkpoints until 1st December 2016. The old Rs. 500 currency notes will be accepted at tollbooths from 3rd to 15th December 2016.

Recharge prepaid mobile currency

You can recharge your prepaid mobile phone by paying with the old Rs. 500 currency notes.

No restrictions on cashless transactions

Here’s a rare reason for you to get swiping. Whip out that Debit Card because there are no restrictions imposed on non-cash transactions. No cash means no worries when you have a dependable plastic friend. Got a Credit Card?

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Category: Bank news Economy News
Dheeraj Kapoor

About Dheeraj Kapoor

BankBazaar is the world's first neutral online marketplace for instant customised rate quotes on Loans, Credit Cards, Insurance and Investment products. Shop for financial products just like you buy everything else now - online.

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