Guidelines for replacement of existing Rs 500 and Rs 1000 notes with new notes and to understand the procedure of scheme and relevant provisions of Income Tax.
Guidelines
for replacement of existing Rs 500 and Rs 1000 notes with new notes and to understand
the procedure of scheme and relevant provisions of Income Tax.
1)
In terms of Gazette Notification No 2652 dated November
08, 2016 issued by Government of India, Rs. 500 and Rs. 1,000 denominations of
Bank Notes of the existing series issued by Reserve Bank of India (hereinafter
referred to as Specified Bank Notes) shall cease to be legal tender with effect
from 9th November, 2016, to the extent specified in the Notification.
Objective
With a view to curbing financing of terrorism through
the proceeds of Fake Indian Currency Notes (FICN) and use of such funds for
subversive activities such as espionage, smuggling of arms, drugs and other
contrabands into India, and for eliminating Black Money which casts a long
shadow of parallel economy on our real economy, it has been decided to cancel
the legal tender character of the High Denomination bank notes of Rs.500 and
Rs.1000 denominations issued by RBI till now. This will take effect from the
expiry of the 8th November, 2016
2)
Withdrawal from ATMs would be restricted to Rs. 2,000
per day per card up to November 18, 2016. The limit will be raised to Rs. 4,000
per day per card from November 19, 2016 onwards.
3)
Limit on amount to be exchanged during November 10,
2016 to December 30, 2016
One can
exchange upto Rs. 4,000 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.
4)
For those who are unable to exchange their Old High
Denomination Bank Notes or deposit the same in their bank accounts on or before
December 30, 2016, an opportunity will be given to them to do so at specified
offices of the RBI on later dates along with necessary documentation as may be
specified by the Reserve Bank of India.
5) Bank Branch for exchange of old bank notes:-
One can
go to any branch of any bank. In that case one has to furnish valid identity
proof for exchange in cash. (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).
Please also carry original identity proof for verification.
6) Should one go to bank personally or can one send the
notes through representative?
In case it is not possible for a person
to visit the branch then the person may send representative with an express
mandate i.e. a written authorization. The representative should produce
authority letter and his / her valid identity proof while tendering the notes.
7)
Limit on amount of cash withdrawn against cheque:
One can
withdraw cash against withdrawal slip or cheque subject to ceiling of Rs.
10,000/- in a day within an overall limit of Rs. 20,000/- in a week (including
withdrawals from ATMs of Rs. 2000/4000
per day) upto 24th November 2016, after which these limits shall be reviewed.
8)
If any person right now not in India, what should
he/she do?
If the person has Specified banknotes in India, he/she
may authorize in writing enabling another person in India to deposit the notes
into his/her bank account. The person so authorized has to go to the bank branch
with the Specified bank notes, the authority letter given by the person 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)
9)
If any person is NRI and hold NRO account, can the
exchange value be deposited in my account?
NRI can deposit the Specified banknotes to his/her NRO
account.
Time limit of the
Scheme
Time limits for deposit /exchange/withdrawal in tabular
form is as given below
10) How much cash
can be deposited
The person who maintains/is required to maintain books
of accounts, the cash appearing in books of account as on 08-11-2016 can be
deposited without any limit. Books should be updated upto 08-11-2016 and only
cash available as per books can be deposited.
Any amount deposited in bank should be corroborated
with evidence through books or cash flows, where there are no books. However if
the source is unexplainable then as per instructions it will be taxed @ 30%
along with penalty @ 200% i.e. total tax liability could be 90% of unexplained
cash. The department may raise question on amount deposited exceeding Rs. 2.5
lacs during November 10, 2016 to December 30, 2016.
11) Whether all
cash available as on 08-11-2016 needs to be deposited
If all cash is in denomination of 500/1000 then all
cash needs to be deposited or exchanged upto the value of Rs. 4,000. However
the cash available in denomination of 100 or less can be kept as cash.
12) Whether cash
needs to be deposited in one account
The
amount can be deposited in all bank accounts. There is no condition to deposit
all cash in one bank account.
13) Amount to be
reported by Banks in AIR to income tax department
As per the provision of rule 114E:
Normally
in AIR the amount deposited in saving bank account Rs. 10 lacs or more annually
needs to be reported by bank to income tax department. Further in current
account, amount deposited/withdrawn exceeding Rs. 50L needs to be reported.
However as per the statement (Tweet) given by Mr.
Hasmukh Adhia, the income tax department may seek the information for deposit
of cash exceeding Rs. 2.5 lacs during the period November 10, 2016 to December
30, 2016. The income tax department may raise queries and ask for explanation
on such deposit. The tax liability could be as explained above.
14) Is there any
restriction for cash sale before 08-11-2016 or after 08-11-2016
As
per provisions of rules 114B to 114E, the seller is required to mention the PAN
number on sale invoice exceeding Rs. 2 lacs. If the buyer is not having PAN
then Form 60 needs to be taken and Form 61 needs to be filed with the
department. Further as per the provisions of Section 206C – TCS needs to be
collected @ 1% on cash sale exceeding Rs. 2 lacs.
Further
as per provision of rules 114B to 114E, if cash are received from any person
exceeding Rs. 2 lacs per year then the detail needs to be reported to income
tax department in Form 61A.
Cash sale from 09-11-2016 onwards
cannot be against notes 500/1000 as these are not legal currency except for
specified seller.
The
seller who is liable to tax audit will be required to maintain the person wise
detail (including Name, Address and PAN/Form 60 ) of cash sales for computing
the threshold limit of Rs. 2 Lakh received from such person.
15) Provisions
related to cash purchase
As per the provisions of Section
40A(3) of the Income Tax Act, cash purchase exceeding Rs 20,000 will not be
allowable as business expenses. Therefore cash purchases can be made upto Rs
20,000 per invoice in day.
Notification
No 2652 dated November 08, 2016 is enclosed for ready reference. Please also
find enclose herewith FAQs issued in respect of withdrawal of Legal Tender
Character of the existing Bank Notes in the denominations of Rs. 500/- and Rs.
1,000/-.
Disclaimer:
The entire contents of this document have been prepared on the basis of
relevant provisions and as per the information existing at the time of the
preparation. The observations of the author are personal view and the authors
do not take responsibility of the same and this cannot be quoted before any
authority without the written permission of the author.
(Author
– CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice
from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer:
The entire contents of this document have been
prepared on the basis of relevant provisions and as per the information
existing at the time of the preparation. Although care has been taken to ensure
the accuracy, completeness and reliability of the information provided, I
assume no responsibility therefore. Users of this information are expected to
refer to the relevant existing provisions of applicable Laws. The user of the
information agrees that the information is not a professional advice and is
subject to change without notice. I assume no responsibility for the
consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE
FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING
OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION. This is only a
knowledge sharing initiative and author do not intend to solicit any business
or profession.
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