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Everything You Need To Know About The Ever Changing Rules Of Demonetisation

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On November 8, the Prime Minister announced the demonetisation of notes of ₹500 and ₹1,000. It means that the status of the bank notes as legal tender issued by the Reserve Bank of India has been withdrawn. Simply put, you can no longer use them for a transaction in any business or store them for use in the future. The exceptions are discussed below.

This policy decision and its subsequent effects impact everyone, and it is important to have accurate and comprehensive information regarding the demonetisation of currency. It is with this spirit that Nyaaya has created this guide that we constantly update where we track changes in policy and inform you about them. You can also check all the original notifications which we are compiling here.

What should you do with your demonetised currency notes?

If you have any bank notes that have been demonetised, you can do three things with them:

1. They can be deposited into your account with any:

  • Public Sector Bank
  • Private Sector Bank
  • Foreign Bank
  • Regional Rural Bank
  • Urban Co-operative Bank, or
  • State Co-operative Bank.

There is no limit on the amount of money to be deposited. You can deposit money till December 31, 2016. After this date, you can continue to deposit money at offices of the RBI.

2. They can be exchanged for value only at any of the offices of the Reserve Bank of India. This can be done until March 31, 2017. The limit for such exchange is ₹2000, and this can be done once by one person. You have to fill a form for exchanging notes.

3. Old banknotes of ₹500 can still be used for certain purposes until December 15. This has been talked about in detail later on in this guide.

What are the current limits for withdrawal/exchange from banks and ATMs?

If you are using an ATM card: you can withdraw ₹2500 per card daily. However, some ATM machines are yet to be calibrated and will dispense ₹2000 per card.

If you are withdrawing from a bank, there is no daily limit to how much you can withdraw. However, there is a weekly limit of ₹24,000 for withdrawal from bank accounts.

The withdrawal limit can be eased if you are depositing valid currency (new legal notes as well as notes that were always valid like ₹50 and ₹20) into your account.

The increase in withdrawal will be in effect from November 29, 2016, and will be in proportion to the total amount of legal notes you are depositing. For instance, if you deposit ₹5,000 in your account, out of which ₹2,000 is in legal notes, your withdrawal limit for the week will increase by ₹2,000. For that week, your withdrawal limit will be ₹26,000.

If you have a current, overdraft or cash credit account: (operational in the last three months) then you can withdraw up to ₹50,000 in a week.

Note: As of November 29, 2016, different withdrawal limits apply to Jan Dhan accounts.

What is the upper limit to deposit money?

There is no upper limit to the amount of money you can deposit if you have a functioning bank account.

Are there any provisions for specific persons or situations?

Farmers can withdraw up to ₹25,000 in cash from their loan or deposit accounts. They can also use the demonetised ₹500 notes to buy seeds from government centres.

If you have a wedding in the house, you can withdraw a maximum of ₹2,50,000 from your bank account till December 30, 2016, for wedding related expenses.

There are certain conditions which must be fulfilled in order to benefit from this:

  • The amount can be withdrawn only if the date of marriage is on or before December 30, 2016.
  • Withdrawal can be made by only one person, either by the parents of the person getting married or the person themselves.
  • The application form should be fully filled.
  • Evidence of the wedding, including the invitation card, copies of receipts for advance payments already made, such as marriage hall booking, advance payments to caterers, etc.
  • A detailed list of persons to whom the cash withdrawn is proposed to be paid, together with a declaration from such persons who do not have a bank account, where the amount proposed to be paid is ₹10,000/- or more. The list should indicate the purpose for which the proposed payments are being made.

Do I need to go to the bank personally?

No, if you are unable to go to the bank to deposit money, you can send someone on your behalf to deposit the money. You will have to provide a written declaration, signed by you authorising that person to deposit money on your behalf. The representative must have a valid ID proof.

Can I withdraw cash against cheque?

Yes, subject to the withdrawal limit of ₹24,000 per week.

What can you do if you are a foreign tourist in India?

You can exchange foreign currency for Indian currency notes, limited to ₹5000 in a week.

Are there any provisions for using these notes for any emergency needs?

Until December 15, 2016, you can use the demonetised ₹500 notes for the following:

  • For making payments in government hospitals for medical treatment and pharmacies in government hospitals for buying medicines with a doctor’s prescription.
  • At railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses and airline ticketing counters at airports for the purchase of tickets. (Note: As per the notification on November 30, the facility for buying airline tickets is only until December 2, 2016, for railways and buses it continues until the 15th.)
  • For purchases at consumer cooperative stores operated under authorisation of Central or State Governments and the customers shall provide their identity proof; However, the purchase from Consumer Cooperative Stores will be limited to ₹5000 at a time.
  • For purchase at milk booths operating under authorisation of the Central or State Governments.
  • For the purchase of petrol, diesel and gas at the stations operating under the authorisation of Public Sector Oil and Gas Marketing Companies; (Note: as per notification on November 30, this facility is only until December 2, 2016.)
  • For payments at crematoria and burial grounds.
  • For making payments in all pharmacies on production of doctor’s prescription and proof of identity.
  • For payments on purchases LPG gas cylinders.
  • For making payments to catering services on board, during travel by rail.
  • For making payments for purchasing tickets for travel by suburban and metro rail services.
  • For making payments for the purchase of entry tickets for any monument maintained by the Archaeological Survey of India.
  • For making payments towards any fees, charges, taxes or penalties, payable to the Central or State Governments including Municipal and local bodies.
  • For making payments towards utility charges for water and electricity only which shall be restricted to individuals or households for payment of only arrears or current charges. No advance payments shall be allowed.
  • For payments towards court fees.
  • For making payments when purchasing of seeds from the centres, units or outlets belonging to the Central or State Governments, Public Sector Undertakings, National or State Seeds Corporations, Central or State Agricultural Universities and the Indian Council of Agricultural Research, on providing a proof of identity.
  • Payment of school fees up to ₹2,000 per student in Central Government, State Government, municipality and local body schools.
  • Payment of fees in Central or State Government colleges.
  • Payments made for prepaid mobile top-up to a limit of ₹500 per top-up.
  • For toll payments at plazas operating under the National Highways Authority of India. This will be applicable from December 2, 2016, to December 15, 2016, as tolls have been made free until December 2, 2016.

Under what section of the law has demonetisation been enacted?

This has been done under the Reserve Bank of India Act, 1934. Section 24(2) of the RBI Act 1934 empowers the central government to direct the discontinuation of bank notes of any value. Section 26(2) of the same Act says that the central government can declare that any bank notes shall cease to be legal tender.

Disclaimer: We have tried to keep the information accurate and up to date. In case you spot a mistake, let us know and if possible point us to the correct information. This guide has been created based on the information given on the RBI website and the notifications issued by the Ministry of Finance. You can also check all the original notifications, which we are compiling here.

This post was originally published here and you can check it for regular updates.

About the author: Nyaaya is a free, non-profit resource explaining and documenting all Indian laws. They have just launched the public beta version of the website.


Image source: Hindustan Times/Getty Images
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