The government has no plan to extend the deadline of December 30 for depositing old notes of Rs 500 and Rs 1,000 in bank accounts, Minister of State for Finance Arjun Ram Meghwal said on Tuesday. The government has increased the circulation of Rs 100 notes to ease the cash crunch. “No such proposal for extension of deadline beyond December 30, 2016, is presently under consideration of the government,” Meghwal said in Rajya Sabha in reply to a query on whether the December 30 deadline will be extended.
He said sufficient cash is available with the Reserve Bank and banks have been advised to increase supply of lower denomination notes in rural areas. “There is sufficient cash available with the Reserve Bank of India (RBI) and the banks. Circulation of notes in respect of Rs 100 has already been increased. Further to cater to the requirement of rural areas, banks have been advised to supply notes of smaller denominations (Rs 100 and less),” he said.
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As on November 8, the day demonetisation was announced, there were 1,716.50 crore pieces of Rs 500 and 685.80 crore Rs 1,000 notes in circulation, which are no more legal tender. Prime Minister Narendra Modi on November 8 announced decision to abolish Rs 500 and 1,000 notes, which accounted for 86 percent of the cash in circulation.
The government had allowed people to deposit of exchange these notes at bank and RBI branches till December 30. The facility of exchange of old notes was stopped at the bank counters on November 24. But the government extended deadlines allowing people to make payments in old Rs 500 notes at toll plazas, hospitals, petrol pumps and for paying utility bills till December 15.
The deposits of old notes have swelled with the banks since the announcement of these being dropped as legal tender. As per latest data released by the RBI, between November 10 and November 27, banks reported exchange and deposits of old notes worth Rs 8.45 lakh crore (exchange of Rs 33,948 crore and deposits of Rs 8.11 lakh crore).
During this period, an amount of Rs 2.16 lakh crore had been withdrawn by people from their accounts. Since a large chunk of the new notes withdrawn are of Rs 2,000,it has affected cash transactions for lack of change for higher denomination currency. The government has set the daily withdrawal limit from ATMs at Rs 2,500, while the weekly cap on cash withdrawal from bank accounts is Rs 24,000 per person.
To prevent people from using others’ bank accounts to convert their black money, the Lok Sabha on Tuesday passed amendments to the Income Tax Act enabling the government to impose a higher penalty and tax rate on assessees of unexplained deposits, totalling up to 85 per cent.
The Taxation Laws (Second Amendment) Bill, 2016 also introduced a scheme named Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) in the Bill, according to which a 30 per cent tax plus 33 per cent surcharge on the tax and a 10 per cent penalty is proposed to be levied on the undisclosed income in the form of cash and deposits. Along with the total 49.9 per cent of tax, penalty and surcharge, the declarant will have to deposit 25 per cent of the undisclosed income in a interest-free deposit scheme for four years.