Demonetisation 2.0
₹2000 Denomination Banknotes – Withdrawal from Circulation

The Reserve Bank of India (RBI) on Friday, May 19, 2023, announced that it has decided to withdraw the Rs 2,000 currency notes from circulation. The Reserve Bank of India (RBI) stated that the decision has been taken under its ‘Clean Note Policy’ and clarified that the note will remain legal tender.

The Reserve Bank of India (RBI), introduced this  2000 rupee note on November 8, 2016. after the demonetisation of ₹500 and ₹1000 banknotes and has been in circulation since 10 November 2016. It is a part of the Mahatma Gandhi New Series of banknotes with a completely new design. Now India’s central bank, on Friday, announced its decision to take Rs 2,000 notes out of circulation, only 7 years after they were first introduced.

The central bank asked all to deposit the Rs 2,000 banknotes into their accounts or exchange them for banknotes of other denominations at any bank branch by September 30, 2023. Deposit into bank accounts can be made in the usual manner, without any restriction. The exchange facility for Rs 2,000 currency notes will start from May 23, 2023, the RBI said. Do keep in mind that the existing Rs 2,000 denomination banknotes will continue to be legal tender.

How to exchange or deposit Rs 2000 notes?

From May 23 onwards, People can go to any bank and exchange 10 notes of Rs 2000 notes at a time with currency notes of other denominations. The facility will be available till September 30. In order to ensure operational convenience and to avoid disruption of regular activities of bank branches, exchange of ₹2000 banknotes into banknotes of other denominations can be made upto a limit of ₹20,000/- at a time at any bank starting from May 23, 2023.

People can also exchange the Rs 2000 notes at the 19 Regional Offices (ROs) of RBI having Issue Departments from May 23, 2023. Further, People can exchange Rs 2000 notes through Business Correspondents (BCs), up to a limit of Rs 4000 per day for an account holder.

Also People can visit to bank and deposit the money in thire account. There is no deposit limit but general KYC and other existing statutory norms for cash deposit will apply. “Deposit into bank accounts can be made without restrictions subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory/regulatory requirements,” the RBI said.

Is there any fee for Rs 2000 exchange?

As per RBI, the exchange facility will be provided free of cost.

What to do if a bank refuses to accept/exchange Rs 2000 notes?

RBI said, “For redress of grievance in case of deficiency of service, the complainant / aggrieved customer may first approach the concerned bank. If the bank does not respond within a period of 30 days after lodging the complaint or if the complainant is not satisfied with the response/resolution given by the bank, the complainant can lodge the complaint under the Reserve Bank – Integrated Ombudsman Scheme (RB-IOS), 2021 at the Complaint Management System portal of RBI.”

Exchange of Rs 2000 banknotes in State Bank of India (SBI):

For exchanging Rs 2000 notes in SBI, you will not need to fill out a requisition slip. The State Bank of India clarified that the facility of exchange of Rs 2000 denomination bank notes up to a limit of Rs 20,000 at a time will be allowed without obtaining any requisition slip. The SBI has modified its previous instructions which required the tenderers to fill a requisition slip. The bank also said that no identity proof is required to be submitted by the tenderer at the time of exchange.

“In partial modification of instructions contained in Para 4(B), it has been decided that the facility of exchange of Rs 2000/- denomination Bank Notes to all members of the public up to a limit of Rs 20000/- at a time will be allowed without obtaining any requisition slip…,”

What are the tax implications of depositing Rs 2,000 notes?

1. Taxation in case depositing in Bank Account 
   As per the existing norms, Banks are obligated to report cash deposits over a certain limit to the Income Tax Department. Currently, deposits over Rs 10 lakh for term and savings deposits and Rs 50 lakh for current account deposits in a financial year need to be reported by the banks to the tax authorities. The income tax department uses the SFT statement to check for discrepancies and can issue a notice to the depositor for clarification.
   
   The RBI has not mentioned any limit in depositing the Rs. 2000 currency in bank accounts. However, individuals who exceed certain prescribed limits in their deposits may receive notices from the Income Tax Department. Failing to satisfactorily explain the source of such cash deposits may result in tax as unexplained cash Credit @ 60% along with penalty. So its very important to take care while depositing cash in bank accounts it should not exceed prescribed limits as mentioned above.
   
   
2. Taxation in case of Exchange of Currency
    Currently, People can go to any bank and exchange 10 notes of Rs 2000 notes at a time with currency notes of other denominations. There is no system in place to verify the total amount exchanged by an individual from different banks in a single day or the total amount they will exchange until September 30. This poses a significant challenge for banks in managing the situation.
   
   However, if individuals provide their PAN (Permanent Account Number) during the exchange, the total amount exchanged can be determined at a later date.
   
   
3. What happens in case get an I-T notice
   If get an I-T notice, then the onus is on the taxpayer to establish the source of income and provide documentary evidence. As per Section 68 of the Income Tax Act, if large deposits are made without furnishing justification on the nature of such deposit in the Income Tax return, the same may be treated as unaccounted deposit. In such circumstances, the Income Tax Department may scrutinise the deposits which are suspicious in nature and may also issue notice to the depositor, thereby seeking justification for the such deposits.