Local Goa News

Thursday, November 24, 2016

Old notes can't be exchanged now; govt likely to levy 60% tax on unaccounted bank deposits

You will not be able to exchange your old Rs 500 and Rs 1,000 notes in banks as the government on Thursday stopped the swapping of these currency notes over the counter. However, you will be able to deposit them in your accounts till December 30.

You have also been allowed use of Rs 500 notes for certain transactions. (see box). Old Rs 1,000 notes can now not be used for them.

Permission to use old notes for payments of medical supplies, railway reservations, airfares, milk, metro tickets, purchase of petrol or diesel and cremation has been discontinued.

A finance ministry release said that the decision to suddenly suspend over-the-counter exchange was taken to "encourage people who are still unbanked to open new bank accounts". It also said that it had observed a declining trend in the swapping of old currency notes lately.

A source, who spoke on condition of anonymity, however, said one of the reasons for not permitting any more exchange of old currency over the counter was misuse of the facility by many by using "cash mules" to convert black to white.

"This is happening because of its (over-the-counter currency exchange) misuse where cash mules were being used by some people to deposit their unaccounted high value cash. Also, there is this whole purpose of throwing out the informal economy and bringing it into the formal economy," he said.

According to him, people in rural areas will be hit hard by this move as there are many places where there were no banks for several kilometres and where banks operated only once a week. Additionally, the government also decided to allow people to continue the use of old Rs 500 notes for some emergency and essential activities till the middle of next month. However, it disallowed the use of old Rs 1,000 notes, which was earlier permitted for these purposes.

The government has also asked the Reserve Bank of India (RBI) to gird up for meeting the cash demand from government staff and pensioners after the electronic transfer of their salary and pension to their accounts early next week.

It asked banks to specially ensure adequate cash availability for taking care of pensioners and put enough cash at military outposts to meet the cash needs of the Armed Force personnel.

Earlier in the day, Union Finance Minister Arun Jaitley held a videoconference with bank chiefs to work out a strategy to make a shift to a "cashless" economy on a "mission mode" through rampant use of digital methods for transactions such as NEFT, mobile wallets, pre-paid cards, QR codes, pay-roll cards, debit and credit cards, Unified Payments Interface (UPI) and others.

"We had a videoconference with heads of all banks, single agenda of (the) meet was to expand the digital banking itself," the minister told the media after the meeting.

Clearing the confusion over how much penalty would be levied against black money offenders or those who were holding undeclared income, the Union Cabinet is believed to have discussed amending laws to levy close to 60% income tax on unaccounted deposits in banks.

Earlier, the government had said offenders could be charged up to 200% tax. The move comes amid banks reporting over Rs 21,000 crore being deposited in zero-balance Jan Dhan accounts in two weeks after the Rs 500 and 1,000 notes were banned, which authorities apprehend may be laundered black money.

Sources said the Cabinet, which met under Prime Minister Narendra Modi, was keen to tax all unaccounted money in bank accounts after it allowed the banned currency to be deposited in bank accounts during a 50-day window from November 10 to December 30.

They said the government was planning to bring an amendment to the Income-Tax Act during the current session of Parliament to levy a tax that will be higher than 45% and penalty charged on black money disclosed in the one- time Income Disclosure Scheme (IDS) that ended on September 30.

As for black-money holders, who did not utilise the window, they would be charged a higher rate, which could be close to 60% that the foreign black money holder had paid last year. Sources said the government is keen to root out benami deposits, particularly in Jan Dhan accounts.

Where you can use old Rs 500 notes
School fees up to Rs 2,000 per student in central and state government-run and municipality and local body schools.

Fees in central and state government colleges.

Pre-paid mobile top-up to a limit of Rs 500.

Consumer cooperative stores (up to Rs 5,000).

Current bill and arrears for water and electricity.

Since toll plazas made toll-free till December 2, old Rs 500 notes can be used from Dec 3 to 15.

Foreign citizens allowed to exchange foreign currency up to Rs 5,000 per week with an entry in their passports.

DNA India News

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