The exchange of Rs 2,000 notes will begin on May 23. Experts say people should not compare this event with demonetisation and panic unnecessarily.  

“The number of Rs 2,000 notes in circulation, as mentioned in the Reserve Bank of India (RBI) notification, is much lower than the Rs 500 and Rs 1,000 notes in circulation during demonetisation,” says Rupali Singhania, partner, Areete Consultants LLP. In fact, Rs 2,000 notes accounted for only 10.8 per cent of the total notes in circulation on March 31, 2023.

“Another difference this time is that the Rs 2,000 note is still legal tender,” says Arvind A Rao, certified financial planner and founder, Arvind Rao and Associates.

The exchange of notes will continue till September 30. “There is ample time. Visit the bank after the initial rush has died down,” says Kamlesh Barot, partner, Galactic Advisors.

Exchange or deposit?

The next question is whether you should exchange or deposit these notes. “If the cash is accounted for, you can just deposit it in your bank account,” says Harsh Roongta, a Sebi-registered investment advisor and head of Fee-Only Investment Advisors.

The 10-note limit per transaction and per branch is on exchanging. “There is no cap on the amount that you can deposit in your account,” says Rao. This makes depositing more convenient.

“If you have just a few Rs 2,000 notes, exchange them. The other scenario in which a person could exchange is if she doesn’t have a bank account,” says Neeraj Agarwala, partner, Nangia Andersen India.    

If amount deposited is large

During demonetisation, the government had issued a clarification saying that those who deposit amounts till Rs 2.5 lakh would not be asked any questions. Those who had deposited more had received notices.

This time there is no clarification from the government that there won’t be any notices to people who deposit up to Rs 2.5 lakh. “But the income up to Rs 2.5 lakh is anyway exempt under the slab rates. So, there should not be any scrutiny regarding cash deposits up to Rs 2.5 lakh this time also,” says Singhania.

Tax notices come when the deposits exceed the income shown in your tax returns. “If you have never filed a tax return, or the income shown in your return is low and the amount deposited is disproportionately higher, you could get a notice,” says Barot.

Adds Singhania: “Those who are depositing high amounts should have documents to show where the cash has come from, in case another set of notices come.”

Be aware of SFT rules

Bank customers should be aware of the statement of financial transaction (SFT) rules. “If certain transactions cross a threshold level, banks and other entities need to report them to the Income-Tax Department,” says Barot.

Adds Singhania “If you purchase bank drafts, pay orders, or bankers’ cheque by paying cash for an amount aggregating to Rs 10 lakh or more in a financial year, then banks report it under SFT reporting. Further, cash deposits of Rs 10 lakh or more in one or more saving accounts also get reported. Credit card payments of more than Rs 1 lakh in cash also get covered.”  

Singhania informs that every person who intends to enter into transactions like cash deposit or cash withdrawal aggregating to Rs 20 lakh or more in a financial year in one or more accounts in a bank or a post office is required to obtain and quote PAN or Aadhaar.

Agarwala adds that the aggregate threshold in a financial year for a current account is Rs 50 lakh.  

The Rs 2 lakh limit

In the current context, when paying a jeweller or a builder, one should be aware of the Rs 2 lakh limit. “There is a limit of Rs 2 lakh on the income a person or entity can accept either in a single day or per bill/transaction. Splitting a large bill of above Rs 2 lakh and accepting it over several days is also not allowed,” says Agarwala.

Dos and don’ts  

Even though the RBI’s notification to banks does not say that PAN/Aadhaar  is required for exchanging notes, experts say it is advisable to carry KYC documents when you go to exchange or deposit Rs 2,000 notes. “When exchanging or depositing large amounts of currency, especially in the case of demonetised or high-denomination notes like Rs  2,000 notes, it is advisable to carry your KYC documents,” says Rachit Sharma, deputy general manager, Taxmann.

There is no daily limit for the deposit or exchange of Rs 2,000 bank notes. The limit is “at a time” and not per day. “You can conduct multiple transactions on the same day to deposit or exchange Rs 2,000 notes, as long as you adhere to the limit of 10 notes or Rs 20,000 per transaction,” says Sharma. He further adds that banks have to comply with Suspicious Transaction Reporting requirements, so you should avoid exchanging or depositing Rs 2,000 notes on behalf of others.

Finally, Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors suggests: “Check all wallets, purses, drawers, gift envelopes for any Rs 2,000 notes you may be holding.”

·       One-time payment in cash to a hotel or restaurant for amount exceeding Rs 50,000

·       One-time payment for foreign travel, purchase of forex exceeding Rs 50,000

·       Purchase of mutual funds; bonds of debentures from a company or institution; bonds from RBI for amount          exceeding Rs 50,000

·       Cash deposit to a bank or post office exceeding Rs 50,000 in a day

·       Time deposit with the bank, cooperative bank or Post Office for an amount exceeding Rs 50,000 or                       aggregating to more than Rs 5 lakh in a financial year

·       Sale or purchase of immovable property for an amount exceeding Rs 10 lakh

Note: List is incomplete; go through concerned regulations for further details

Source: Nangia Andersen India