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Demonetization - Exemptions and reliefs
As you are aware Government of India has demonetized Rs. 500 and Rs. 1000/- currency and placed several restrictions on cash transactions to deal with cash crunch problems as a result of it. The main restrictions are
- Restrictions on use of demonetized currency
- Restrictions on deposit of cash into bank accounts
- Restrictions on withdrawal of cash
- Restrictions on exchange of demonetized currency with legal tender
The main objective of the demonetisation exercise is to unearth black money. Hence the old currency (Rs. 500, Rs. 1000/-) cannot be used any longer. Since the exercise is done secretly, the Government is not in a position to ensure that legal tender is available throughout and resulting cash shortage in several parts of the country.
It is undisputable that in several areas the transactions mainly done through cash, like at hospitals, public transportation, etc. Keeping in view of this certain exemptions were provided, enabling people to use old currency
- Government Hospitals
- Railway ticketing counters
- Public transport
- Electricity and water bills
- Airline ticketing at airports
- Milk booths
- Cremation / burial grounds
- Petrol pumps
- Metro rail ticket counters
- Highway and toll operators
- Government and Private Pharmacies on Doctors prescription
- LPG Gas cylinders
- Railway catering
- Co-operative stores run under Government
- Any fees to Government whether Central, State or Muncipal bodies.
People can continue paying with old Rs. 500 and Rs. 1000/- currency notes. However, this exemption is not indefinite and absolute. These exemptions can be used till 30 December 2016. Almost at most of these places proper id proof should be produced at the time of making payment.
Restrictions on deposit of Cash into bank accounts
Technically, people are free to deposit cash into their bank accounts. But Government imposed procedural restrictions on cash deposits.
Every cash deposit should be accompanied by proper id proof.
Earlier people used to allow cash of friends to be deposited in our account. Now this can be done only if a mandate is provided by that person and a proper id proof of that person is also provided.
All cash deposits has to be accounted for to the income tax department over time.
People even started getting income tax notices for high cash deposits.
If these procedures are met, one can deposit amount to any extent in their bank accounts.
Restrictions on withdrawal from bank accounts
These restrictions were put into effect with twin objectives. Firstly, if heavy withdrawals were allowed, the withdrawn new currency will be misused to exchange black money and defeat the very purpose of the exercise. Secondly, it is to meet the cash crunch in the market.
Withdrawal from ATM
Cash withdrawal from ATM initially limited to Rs. 4,000/- per day and then marginally increased to Rs. 4500/-. Now it is restricted to Rs. 2,500/- per day.
Withdrawal through Cheque - Earlier daily ceilings of Rs. 10,000/- were put in place. But now, there is no daily ceiling. Presently a weekly ceiling of Rs. 24,000/- is there for individuals. That means Individuals can withdraw Rs. 24,000/- maximum from their savings accounts per week. Similar restriction is placed on businesses, which is Rs. 50,000/- per week ceiling to withdraw from current accounts.
There is no restriction on use of ATM Cards, Credit Cards, Net banking to make transactions subject to the regular limits imposed by bank. In fact Government is encouraging people to use these to curtail black money.
Finally, the Restrictions placed to exchange old currency.
People can tender old Rs. 500, Rs. 1000/- currency notes and get valid currency. This can be done till December 30, 2016.
This exemption limit is similar to the atm withdrawal limit. Initially it was Rs. 4,000/- and marginally increased to Rs. 4,500/- per day. Now the limit stands at Rs. 2,500/- per day. In case of machines, which are not calibrated to dispense new currency, the limit is Rs. 2,000/- only.
Exemptions provided for special occassions
Owing to the heavy queues at the Toll Plazas on Highways, the Governemnt exempted from paying Toll fee till November 24, 2016.
People with wedding planned, can withdraw upto Rs. 2,50,000/- by providing pan card and self declaration.
Farmers with Kisan credit card or who availed crop loan can withdraw a further 25,000/- in addition to the regular limit an individual can withdraw.
Deadlines for payment of crop insurance is extended
To relieve pressure on banks, Government has allowed Group C employees to withdraw Rs. 10,000/- salary in advance, which will be adjusted against future salary.
Government also allowed to withdraw from Point of Sale outlets like petrol bunks, super markets within the overall limits.
If you have any other queries, our dedicated financial consultants can help you get orver with the Demonetisation problems