Rs 500/1000 notes banned – Here are 5 critical facts to know
POSTED BY ON November 9, 2016 COMMENTS (107)
Last night, it was a historic moment when our Prime Minister informed the whole nation that Rs 500 and Rs 1000 notes will not be eligible currency notes from midnight at the end of 8th Nov, 2016. Here is the RBI notification
PM Modi had also explained all the points very well in his speech and shared how people should not worry about this if they have money with them and it can be exchanged with new notes in next 50 days, however seems like a lot of confusion is there around this topic and many myths are floating around.
5 important facts about the old notes bank
Below are some of the most important facts which you should know after this Rs 500 and Rs 1000 notes bank. There are lots of myths around and I wanted to clear them. These points which I have mentioned below are taken out of the RBI notification itself.
Fact #1 – You can deposit any amount of old notes in your bank/Post Office account
You can “deposit” your old currency in your bank account till 30st Dec, 2016. There is no limit on this amount and if you have Rs 50 lacs with you in Cash, you can just walk into your bank branch (expect a lot of rush) and just deposit the amount in your bank account. The limit which is there is on the “exchange” which is the next point. Please find below the exact wording from the RBI notification.
Also note that there is no limit of deposit for account whose KYC is complete. If KYC is not yet complete, the limit is Rs 50,000.
#2 – You can exchange up to Rs 4,000 notes in ANY bank branch in first 15 days
You can walk to ANY bank branch and exchange up to Rs 4,000 of old notes along with your identity proof (PAN, Aadhaar card, Passport etc). You don’t need a bank account in the same bank. After 15 days, this limit of Rs 4,000 will be reviewed and raised. I am sure this small limit is kept so that most of the middle class and poor people are handled before other privileged class 🙂 . Apart from the bank branches, you can also visit RBI centers for this exchange.
#3 – You can deposit the money in 3rd party account also
It is also possible to deposit the money to 3rd party account also if you follow the full procedure and produce a valid ID proof (your own)
#4 – Cash withdrawal Limit from ATM and Bank Branch
There is following withdrawal limit set by the govt.
- ATM – 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. - Bank Branch – Till 24th Nov, 2016, you can walk to your bank branch and withdraw up to Rs 10,000 in a go, but the overall limit is Rs 20,000 per week.
You can walk to ANY bank branch and exchange up to Rs 4,000 of old notes along with your identity proof (PAN, Aadhaar card, Passport etc). You don’t need a bank account in the same bank. After 15 days, this limit of Rs 4,000 will be reviewed and raised. I am sure this small limit is kept so that most of the middle class and poor people are handled before other privileged class 🙂 . Apart from the bank branches, you can also visit RBI centers for this exchange.
#5 – You can deposit the old notes till 31st Mar, 2017 in worst case
In worst case, if you are not able to deposit the cash in your bank account or exchange those till 30st Dec, 2016, Still you will get another change to deposit the amount at RBI designated branched till 31st Mar, 2017 with proper documentation. One of my close friend parents are coming back to India from US after Jan, and they were worried after this news. I told them about this 31st Mar, 2017 deadline which calmed them!
Below is the speech by our Prime minister in case you want to hear it.
The big confusion and the Panic
This whole news which came out last night has created a big confusion among people and I can see many of them in panic situation. A lot of people who know clearly that their money is still safe and can be deposited back in bank account are also acting like the world has come to the end.
On the lighter note, social media went crazy and there were some really hilarious tweets which started circulating across various platforms.
There was news of people rushing to buying gold, doing shopping last night (till midnight) and what not. Understand that if your money is legally earned and you are paying the taxes, you need not panic and just keep calm, you can deposit it with bank and your money is 100% safe.
Only those who have black money will be facing problem as now all the money they have is worthless.
Discomfort because of the BAN
While there is surely some level of discomfort, but that’s very obvious and it’s bound to happen when things change at this level. This bank of old bank notes is for good and our countries future. This will really help curb black money and corruption in a big way.
Will update more on this topic in coming days. New notes of Rs 500, and Rs 2,000 will get started from Nov 11th .
Let us know your views around this topic in comments section below
Of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, when the note ban was announced, currency worth Rs 15.31 lakh crore have been returned.
Thanks for comment
if my friend give me the open cheque for Rs 20,000/-, shall I get cash at bank counter for full amount?
Yes you can
Can I withdram Rs 20,000/- on self cheque ?
I am NRI, Came to India Sep2016 and left with family end of Sep16 house is locked and keys with me , have some notes with me overseas and some notes in my House in india.
I will visit India Next year Oct 2017.
no way I can get leave to come back to exchange the money and spend flight ticket of Rs 40K to exchange the notes .
Guess I lost my hard earned money for the sake of others sins in black money
NRI;s can change the notes till June end 2017
But now we can exchange only 2000 and most parts of Tamilnadu didn’t get new 500 rupee note yet…
Even in Gujarat I have not seen Rs500 new notes
Hi Manish,
Thank you for your wonderful tips.
As you know lot of news are going around whether this move of demonetization is right or wrong and there are still confusions in mind of people. Politicians are raising this as an issue or problem whereas public is not sure whether they or country will benefit out of this move.
We would like to know your views about this change and what & how will affect the things around us viz. it seems housing rates will come down, black money will be removed at high % (not fully), politicians are crying as to what they will do of their black money and how will it be used in elections, this has also impacted the money supply to terrorists etc. etc.
I believe you must have thought about it. Awaiting you views or separate article on this.
Thanking you in advance,
Truly speaking I am not competent enough to comment on its implications in long term. There are economists and big people who can understand its impact. I cant 🙂
Oh, noted. But you are not less than those economists. What special characteristics they have than you? You are the financial expert and always advise on such unforeseen happenings. I am little surprise to see that neither you or your team do not have anything to comment on such major change in economy.
I have a comment, but its more of a gut feeling and nothing else 🙂 . I am not sure if its going to be right or not . Ok let me share what I feel
I think its a good move, which will destroy a lot of black money, but at the same time it has brought a lot of inconvinience to people (especially poor class), which is ok, but the execution of this could have been better. However as its a big country and such a big move, its very tough to plan ahead . Things mess up 🙂 and you cant do anything about it.
However how it will impact the GDP or economic activity, I cant comment as I really dont have any idea 🙂
Manish
Thank you Manish for your comments. We are ready to bear pain, to gain at the end. Hope this turns out to be a good move. Such bold step was required and no one should have taken this other than Shri Modiji. You are right, the poor are suffering due to this.
Lets hope for ‘Acche Din Aayenge’. 🙂
I think the “planning better” part was made difficult by the fact that Mr. Modi decided to keep the Demonetization plan a closely guarded secret which only 3 people in his cabinet knew about. One person can only plan so much in advance without guidance from other experts around. There is no way one person could have envisioned or foreseen every possible scenario that could arise due to this massive undertaking to shake the core of the nation.
Not even the finance minister knew about the Demonetization. In hindsight it’s a great strategy since if more people knew about it beforehand, chances of information leaking to press would have been greater and the plan would have failed. 24 hours would have been enough to convert most of the black money to white.
Modi is truly focused on eradicating Black Money from India. This is not the only move he has in his arsenal. He has quite a few trump cards and he will unleash them one by one. We just need to ride the wave with him and make his grand plans a success. India has been waiting for such a Prime Minister since Independence. He has the power to change the landscape forever and I’m glad he is exercising his executive powers for the greater good of the nation, something which politicians rarely do. Let’s all support him wholeheartedly.
Yes, I agree with your points 🙂
I think as per time passes we will be able to see the real impact of this.
Manish
How does the demonitisation and cash in flow to the banks effect the interest rates for home loans in particular?
Is it better to clear principal outstanding home loan amount now or better later ?
I am not sure how demomonitization has relation with prepayment
I have account payee cheque of rupees 30000 of a cooperative bank and I have submitted this cheque in dena bank so is there any cheque clearance issues in my case because of restrictions on cooperative banks to change the old notes please clear my doubt
There should not be any issue …
how much i can deposit in third party a/c at a time and how many times
Any amount, but with all explaination !
Still Now we can get 2,000 rs currency in all banks. Now you can get 24,000 per week in all banks.
Glad to know that Praveen Kumar ..
can I transfer the amount of Rs 50000/- to my son PPF account by cheque during this period.My son”s PPF account and my saving account is in same branch. pls comment
You can … Whats the issue !
This is amazing. I read an article on BBC about this and it said that its all about getting people to pay taxes. I don’t understand that? In the United States when you earn income you get a form with the amount and the government gets a copy of the same form. So if you don’t pay your tax they know and then they fine you.
How does keeping money stashed away avoid tax? Or maybe the better question is, “how would you ever prove that you had paid the tax on your black money?” Interesting post. http://www.patientwealth.com
it is also heard that PAN no is required for purchasing jewellery only above 2L So someone can purchase jewellery costing around 1.99 L more than one occasion from different vendors without furnishing PAN. Is it a drawback?
I dont think so . Most of the jewelers ask for PAN for any small also !
India has got first PM who has dare to fight against BLACK MONEY in very planned manner. I support his decision. We all facing inconvenience regarding currency exchange through bank, but that too only for some days.
Thanks Manish for giving nice information in such a easy language.
Thanks for your comment Umesh P
it is good decision of Indian govt and now they can save a lot of money from corruption.
Thanks for sharing that Money
Dear Manish,
Thanks for making few things clear.
Do you know of any limit to deposit into PPF account during this period. Can one still make all their existing 500s, 1000s to 2.5L deposit to their own bank account + deposit 1.5L deposit into PPF account + 1.5L into Sukanya Samriddhi Account?
Please clarify incase you know
Bharat
I dont think you can use the old notes for investments like this .
Manish
One can use all cash(500/1000) for depositing in his accounts, be they PPF, SB etc.
However, they all are tracked by PAN. One needs to be ready to answer any IT queries subsequently.
Can I withdraw INR 20000/ week from my 2 different accounts in different bank.
Yes you can , Now the limit is raised to 2500 from ATM . You can withdraw upto 24000 from bank branch if you want
what about small businessman, bcu small businessman collect payment on daily basis from market and deposit in credit account or in OD account if the payment is more than 2.5 lakh what would be the implication for TAX . as such there is no black money bcu we have details of all earning and paying tax as per rule,…
No need to worry in that case. Above 2.5 lacs , there will be enquiry and penalty only if there is income mismatch with the quantum of income or the history . Just dont worry is there is no black money involved.
I am in united states and holding Rs. 500 and Rs. 1000 notes . I won’t be travelling any time soon. I might be traveling end of next year. Any idea, if there is any option to exchange them when i visit India or can i exchange them in united states?
No, you cant exchange it later . You need to follow deadline of 31st Mar, 2017 in worst case. The other thing which you can try is depositing the amount in your NRO account
Manish – thanks. Also found an article on few options http://www.sbs.com.au/yourlanguage/hindi/en/article/2016/11/09/4-ways-non-residential-indians-nris-can-change-their-500-and-1000-rupee-notes
Thanks for sharing that !
I am wonder will this step really help to remove Black Money , as i can see people who have Black money can easily find way where to store their extra income by using other’s account even they are using their house maid a/c and their family member . Any one tell me how it is really working?
Bcoz people like them have found their way through ,and unfortunately our educated CA’s are the one how makes them let go so easily by taking their own share .
I find the only sufferers are the common poor people , they are dying with shocks .
Yes, I think some people will be able to convert their black money into white through these means. But my guess is that only 2-5% people will be able to do it. Someone who has 3 crores of cash wont be able to do it at this level.
So its a 95% solution , not a 100% one . Still better than 0%
Sir, this is best best move of our respected PM. But 2000/- nots is again starating point of black money, I think govt. Has to print expiry year on it, so people can awake and again deposit that nots in to bank…
Thanks for your comment sapan shah
Respected sir ,
I beg to state that The Veraval Markentile Bank , PO – Veraval , Distt. – Junagadh , State – Gujarat is not allowing to withdrawn money from saving A/C Rs. 10,000.00 and the Bank is restricted to withdrawn money from saving A/C Rs. 3,000.00 only .
The Bank is not follow the RBI notice .
Regards ,
Arup Kumar Barat .
Thanks for sharing that. Please complain this to RBI ..
I wish to know one thing that an amount of rs.250000 which the govt. said ,which can be deposited without any worry
what does it mean . when deposited is it added to the existing tax return we are filing or is it a total relief .
pls clarify Thank you and i thank all in your organisation for all the valuable info presented in your site.
I myself need more clarity on this and will write on this topic soon
Sir, my neighbour is farmer and he saved approx 5 Lakh money for daughter’s marriage at home in cash. How he will verify that he has legel money from agriculture.
Hi Naveen
I am not very sure on this, I am trying to find out and will come back. All he can do is go to bank and deposit it in 2-3 accounts (people at home) , That would be the best option for now
Manish
Also income from agriculture is exempt..so he has provide valid docs for proving a farmer and deposit the money in bank for getting new notes!
Glad to know that .. thanks for sharing
Though not very sure but my understanding from a tv interview is that since farmers income is agricultural income and tax free income he need not worry and if questioned by the bank. He can show the land pass book to banker.
Thanks for sharing that
Dear Manish, Wants to draw attention on point 3 “You can deposit the money in 3rd party account also.” When you go to deposit money in 3rd party account or in your company account, you must have the authority letter from the account holder.. which specify the name of depositer, account hoder & denomination… & keep id proof.. its necessary to avoid such situation, in which some one intentionally deposit a big amount to the another person’s account without intimated him…
Thanks for sharing that
Hi Manish, I am out of India and I have 10,000inr as cash (all 500 and 1000 notes). Could you please advise how can I exchange it? is Local money exchanger in Australia a option.?
Regards
Ruchi
There is no other way for this. YOu need to give it to someone in India who can exchange it for you.
Also note that you need to give authorization letter. You can also courier it to India
It can be exchanged at the international Airport.
So, nice attempt against corruption.
Thanks for sharing that chetandada santosh kumar patra
What about the people who are having Indian currency 500&1000 notes, if they are returning back to India after 31 March2017?how to exchange?
No other way ..
Give it to someone or courier it to India to someone related to you who can do the exchange in your behalf !
One cannot courier currency. It is illegal. Courier person asks if the packet contains drugs inflatables n cash.
Ok . didnt knew that cash is also not allowed !
Thanks Manish, you have rightly said. No need to panic for those having legal money. However, I have one question about new 2000 rupees note which is claimed to have high technology feature like GPS enability. Is it true. I am curious to know from you.
Its a fake news 🙂
Additional security features are correct. Chips etc not.
Ya correct !
Manish,
How do you see the introduction of 2000 rupees notes?
Won’t that impact negatively in a llon run?
Not much .. its already been so many years since 1000 notes were there. Now with inflation rising , we need 2k notes anyways for dealing for day to day things .
Also the new notes are coming with more security features. I think we should trust govt on this and let them do what they are doing !
New Rs500 and Rs2000 commercial value debatable. No one willing to take it for purchases and give back change!
That might be one off case.
When RBI issues, the notes are backed by sovereign guarantee. Debatable????
I am an NRI, I have few 500 RS notes, we don’t have any banks here who can exchange these currencies and even the currency exchange guys are not accepting 500 and 100 RS notes. Likewise, I know few other friends who are holding 25K to even more.
These are not black money still, people’s will lose lots of their hard earned monies. All these are just few countable friends in my circle if I start counting the number of NRI’s I guess these can go in crores. DO you know what can be done for people like us?
One has to send it to India for changing. You have time anyways till 31st Mar, 2017
As per RBI rules, one should not carry more than 7500 inr out of / in to India . Please check points 18/19 in below link.
https://m.rbi.org.in/scripts/FAQView.aspx?Id=11
So if you bring the money to India by self or third party or courier, isn’t it illegal?
Please clarify if there is any change in this?
ok, I didnt consider that actually 🙂 . You are right . More than 7500 it would be illegal then
It can be exchanged at the international Airport. Also for than Rs 4000, it can be deposited in NRO Account.
I don’t get the “no limit” aspect. If I am depositing 50 lakhs in cash, don’t I have to provide evidence that it is white money, not black? Otherwise, if a person with black money can simply deposit if no questions are asked?
THe no limit means you can deposit any amount of money, but you need to still provide the justification. And above 2.5 lacs there will be investigation and if it mismatches with your income potential, then there might be tax penalty !
That too, if one can provide sufficient justification, there will be no problem. However justifying huge amount is not easy.
Ya
Thanks for your article. Really helpful.
Thanks for your comment Sandeep
I am living in Singapore and I will be coming to India only in april. I have some 1000 notes how to exchange it.
YOu need to do it before 31st Mar, 2017 . No other way
While Government has banned the circulation of existing Rs500 and Rs1000 currency notes, the premium for exchange of such notes has already started. In many cities the premium has touched 40% while in some other states the premium on exchange of such notes is about 30% Read Here for details
Thanks for sharing that Terry
One thing that I have not seen addressed is what do I do with the Rs 500 notes I have with me in the US ? I have some notes that I keep with my passport to use back in Indian airports on my travel to India.
What do I do with those notes now ? Is there any place in the US where I can go exchange them ?
You can try to deposit it in your NRO account if possible !
A historic moment indeed ! Keeping in mind the long term positive impact this move will have on our economy, these short term inconveniences and problems can be willingly put up with..The news going round is that illegal physical gold will be the government’s next target, thought that will be much more difficult to regulate.
Thanks for sharing that Annapurna Shastri
Hey manish.. this comment is for you and ecommerce retailers. Im not sure what happened but i think my neighbor took her parcel from an ecommerce delivery man, shut the grill of her front door and refused to give him change. She was, i think, forcing him to take a 500 rupee note because she is too lazy to go get them changed. He refused and she threw a tantrum trying to intimidate him. People from the other building came to the window to see. In the mall too, people were trying to force cashiers to accept rs 500 and 1000 rupee notes. Ugly scenes occured with the customers arguing. As a country, we need to support the RBI. But alas, people are quite uncooperative and continue to try to cheat even a poor ecommerce delivery man.
Thanks for sharing that. I am sure many incidents like these will be happening !
People are unnecessarily making a panic here by assuming that the notes are no more working. In fact today morning no one is ready to sell goods when I offer Rs 500. I think its just a matter of 2 days, everyone can deposit the money in their bank account and go for new notes.
But, it’s a remarkable move by Mr. Modi and I am happy that I am a witness of such revolutionary decision which will change the future of India. In future when our next generation will read about this in their history, we can tell them our real-time experience and feel good about that. A real Master Stroke & fearless move by Mr. Modi.
Thanks Manish for sharing this info in your blog. 🙂
Hi Santanu
Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also
Manish
Thanks Manish.
You are quick to response with article.. i know you are going to right it today. SO first thing today i search in here.
Glad to know that Mahesh Shandilya ..
Manish,
Cant understand how this really helps curb the black money and corruption…
How does it bring back the black money stashed by politicians and bizmen in swiss banks or properties purchased in india and abroad, etc?
Only the people who have some cash with them are inconvenienced…like the local shopkeepers, small bizmen, etc.
Their cash flows are stuck. ..they will be forced to come in the tax net.
How does it impact the big guys..politicians who run scams in 100s of crores?
It will not bring back the black money and will destroy the existing black money. Also it will act as a detterent for people to now collect the black money as they know it might get destroyed again in same way. I know its not 100% solutions, but a good solution
Manish,
I find myself unable to accpet this reasoning that it will be a deterrent. If this has done anything, it has alerted the bad guys to not keep cash with them or to be upto date with the cooking of their accounting books to ensure that such an action does not catch them unawares again.
The whole cycle of black money will start again with the Income tax officials who will raid the bad guys and then accept bribes in cash or maybe kind.
How is that cycle stopped?
This just brings more money in the banking system, banks have reduced their cost of deposits.
How does it stop the politicians from doing more scams?
Somehow i find the inconvenience much greater than the benefits
thats an interesting angle to it . YEs, a lot of people will now be cautious and deal with black money in smart way, but we cant remove 100% black money . We can only reduce the chances. Its a point of debate if this whole episode will increase that or decrease.
Manish