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Demonetisation Scheme in India

Last Update Date : April 30, 2019
Estimated Read Time: 4 min

What is demonetisation scheme?

On 8th of November 2016, government announced demonetization scheme according to which old currency notes in the denomination of 500 and 1,000 ceased to exist as a legal tender (demonetized) from the next day onwards. Government has launched new currency notes of denomination 500 and 2,000 to replace the demonetized notes.

Why did government demonetize Rs. 500 and Rs. 1,000?

Flow of fake currency (mostly in the form of 500 and 1,000 rupees) was increasing in the economy which was being used to fund terrorism and other evil elements. It was also known that these notes were used to hide taxable income by black money hoarders. Government has killed two birds with one stone by demonetizing these widely forged notes.

What shall I do with my old notes?

You must exchange your old redundant notes in banks and post offices. You can also get them exchanged in any of the 19 offices of RBI all over the country. You can also deposit your old notes in any branch of commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.

I have Rs. 40,000 in old currency. Can I exchange the same at one go?

Presently, you cannot exchange more than Rs. 4,500 per week. As the supply of new currency becomes strong, the limit can be increased by RBI.

How much money can I withdraw from ATMs and banks?

You can withdraw up to Rs. 2,500 per day from any ATM belonging to any bank without paying any fee. You can withdraw up to Rs. 24,000 per week from your bank account through cheque or withdrawal slip. So you can withdraw Rs. 24000 in a single day or in smaller

What is the deadline to exchange or deposit these notes?

The last date to deposit or exchange old notes is December 30, 2016. However, if someone fails to do so, he will be given an opportunity to exchange his old notes at specified offices of RBI along with necessary documentation as may be prescribed by RBI.

Do I need to carry any document for exchange or deposit of notes?

You need to carry your valid ID proof while exchanging old currency over the counter. Carry a copy of the ID proof as well as few banks may even request you to submit a copy for their records. For depositing the old currency in your own account you will not need to submit any ID proof if your account is KYC compliant. However, keep one thing in mind that if you deposit more than Rs. 50,000 in a day then you need to submit a copy of your PAN card in the bank.

I don’t have any old notes but I want to withdraw money. Will I get old notes or new notes from ATMs?

If you don’t have old demonetized currency then you do not need to worry about exchanging the same. You will not get any redundant notes from ATMs or banks if you withdraw money.

I am an NRI and hold NRO account, can I deposit the old currency in my account?

Yes, you can deposit the old bank notes to your NRO account.

I am a foreign tourist and I have these old notes. What should I do?

You can purchase foreign exchange equivalent to ₹5000 using these specified bank notes at airport exchange counters till November 14, 2016, provided you present proof of purchasing the specified bank notes.

If I have emergency needs of cash (for hospitalization, travel, life-saving medicines) then what should I do?

Government understands such concerns of citizens and therefore it has extended the validity of your old 500 and 1,000 rupee notes for certain cases at certain locations till the midnight of November 24, 2016:

  • If you have to make payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor’s prescription
  • They can be used at railway ticketing counters, ticket counters of Government or Public Sector Undertakings, buses and airline ticketing counters, at airports for purchase of tickets
  • They can be used for purchases at consumer cooperative stores operated under authorization of Central or State Governments and the customers shall provide their identity proof
  • They can be used for purchases at milk booths operating under authorization of the Central or State Governments
  • They are valid for purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector Oil and Gas Marketing Companies
  • They are valid for payments at crematoria and burial grounds
  • They can be used at international airports, by arriving and departing passengers, who possess specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character
  • They can also be used by foreign tourists to exchange foreign currency or specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character
  • One can use them for making payments in all pharmacies on production of doctor’s prescription and proof of identity
  • To make 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 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 including water and electricity. However such payments shall be restricted to individuals or households for payment of arrears or current charges only and not advance payments.
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CA Madhuri Marne
Madhuri is a tax expert at H&R Block (India) with over a decade of professional experience. Having co-authored a book on economics for the ICAI exam, she now enjoys writing about tax-related topics in a simple and easy manner. Outside of work, Madhuri is passionate about teaching students who are appearing for professional exams.

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