November 17, 2016

Deposit of old Rs.1,000 and Rs.500 notes -Which transactions reported to IT Dept?

There is a huge confusion and concern among many about tax and penalty on deposit of old Rs.1,000 and Rs.500 notes. It is a biggest fear factor among many. Hence, let us understand in detail about the same.

Deposit of Old Rs.1,000 and Rs.500 notes in Bank

When you deposit old Rs.1,000 and Rs.500 notes, then such transactions will be reported directly to IT Department. These are tracked based on your PAN number. Hence, it is hard for anyone to skip from this net.

Let us understand about what sort of financial transactions will be reported to Income Tax Department by these Banks, Co-Operative Banks and Post Offices, NBFCs, Companies or even Mutual Fund companies. Such reporting method is called as Annual Information Report (AIR).

What is the meaning of Annual Information Report (AIR)?

Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285 BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year.

Meaning of High Value Financial Transactions and their limits (effective from 1st April 2016)

Certain financial transactions are considered as High Value financial Transactions by Income Tax Department. Let us see the list of all such high value financial transactions. If you did any such transactions and not quoted the PAN number, then such transactions are called as “High Value Non-PAN Transaction”. Now the cash you deposit old Rs.1,000 and Rs.500 notes is also be tracked and came under perview.

  • Cash aggregating to Rs.10 lakh or more per year deposited in your Savings Bank or Post Office Account.
  • One or more time deposits (FDs but other than a time deposit made through the renewal of another time deposit) of a person aggregating to Rs. 10 lakh or more in a financial year of a person.
  • Credit Card payments of more than Rs.1 lakh or more by cash or Rs.10 lakh or more in any other mode per year in aggregate.
  • Buying mutual fund units worth Rs.10 lakh or more.
  • Investing Rs.10 lakh or more in Debentures or Bonds issued by any company.
  • Buying shares worth Rs.10 lakh or more.
  • If you buy or sell an immovable property worth Rs.30 lakh or more.
  • Payment made in cash for the purchase of bank drafts or pay orders or banker’s cheque of an amount aggregating to Rs. 10 lakh or more in a financial year.
  • Payments made in cash aggregating to Rs. 10 lakh or more during the financial year for the purchase of pre-paid instruments issued by Reserve Bank of India.
  • Cash deposits or cash withdrawals (including through bearer’s cheque) aggregating to Rs. 50 lakh or more in a financial year, in or from one or more current account of a person.
  • Cash payment exceeding Rs.2 lakh for buying, by any person, of goods or services of any nature.
  • Receipt from any person for a sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through the issue of traveler’s cheque or draft or any other instrument of an amount aggregating to Rs. 10 lakh or more during a financial year.
  • Buy back of shares from any person (other than the shares bought in the open market) for an amount or value aggregating to Rs. 10 lakh or more in a financial year.

Banks, Co-operative Banks and Post Offices report on cash deposited during 9th Nov, 2016 to 30th Dec, 2016

Now along with the above reportings, CBDT notified few changes just to monitor the cash deposits during the period of 9th November, 2016 to 30th December, 2016. The below listed transactions are also be reported as AIR.

  1. If you do Cash deposits with Banks, Co-operative Banks and Post Office- (i) exceeding Rs.50,000 during any one day; or (ii) aggregating to more than Rs.2,50,000 during the period 09th November, 2016 to 30th December, 2016.
  2. If you do Cash deposits with Banks, Co-operative Banks and Post Office-(i) Rs.12,50,000 or more, in one or more current account of a person; or (ii) Rs.2,50,000 or more, in one or more accounts (other than a current account) of a person.

Note

# Rs.2,50,000 for savings accounts and Rs.12,50,000 for current accounts includes all such accounts within a single bank (irrespective of branches).

#  If you have 2-3 bank account with different banks and the overall limit of such deposit not cross (Rs.2,50,000 in savings account and Rs.12,50,000 in current account) in a single bank, such deposits will not be reported.

Let us say you have an account with SBI and also with ICICI. If you deposit Rs.2 lakh in SBI and Rs.60,000 in ICICI, then it will not be reported. However, if you deposit Rs.2,60,000 in either SBI or ICICI, then such deposit will be reported.

# The Cash deposited during 9th November, 2016 to 30th December, 2016 is only considered.

# Cash deposited in New or Old  currency notes in total will be considered for this limit calculation.

Where you can find your Annual Information Return (AIR) report?

PART E of Form 26AS has Details about all such Annual Information Return or AIR Transaction. If you make some high value transactions, then these transactions are automatically reported to the income tax department by banks and other authorities through Annual Information Return (AIR).

Refer few posts related to ban of old Rs.1,000 and Rs.500 notes-

Image Courtsey-Rediff.

79 Comments

  1. One or more time deposits (FDs but other than a time deposit made through the renewal of another time deposit) of a person aggregating to Rs. 10 lakh or more in a financial year of a person.

    Regarding this, I have an FD of 45L in SBI.I got the amount 3 years back after selling house of my late father. I have paid capital gains tax and filed returns 3 years back. Now I need money for few needs, So when it matures, I broke it into 3 Fds(20L, 10L,8L) and the rest I have used for other investments. So will this be reported as part of AIR again in 2017?

    Reply
    • Sourav-In my view NO. Even if they report also, you have valid reasons to show. Hence, why to worry?

      Reply
  2. donate some too poor student like me
    u guys will spoil the money but will not give to needy…..

    Reply
    • Abhay-Donating also turning to be a cautious move. Because identifying the real needy is the biggest task.

      Reply
      • true but would be better then spoiling money….
        in case of identification of poor or whoever deserve to be helped… will provide you ac no

        Reply
  3. sir i deposited in my current a/c rs.800000…why income tax department reported these amount,if current a/c deposit limit is 12.50 lakh during 09-11-2016 to 30-12-2016

    Reply
    • Praveen-Whether the limit is Rs.12 lakh or Rs.1 Cr, if the source of deposited money is accounted, then why you have to worry? Show them the source.

      Reply
      • Sir i have trading bussiness maintain cash in hand rs.8 lakh from cash sale on 08-11-2016 and same is deposited in my current a/c…now in online notice received from ITD how can i disclose these amont weather by my cash book or bank book..

        Reply
        • Praveen-You can mention that it is cash generated through your business for that day.

          Reply
  4. I got message from income-tax department about deposit 500000 rs in my account
    But I deposited only 2.40 lakh
    Now they tell to give report
    What to do?
    Plz help me

    Reply
  5. Hello Basu, My name is Neha and I am house wife. I am earning part time as an online freelancer writer. I have deposited One lakh Eighty thousands in my account due to demonetization. This I saved from my home expenses as cash in about 10 years (given by my husband for house hold expenses). I have never filed ITR before as my taxable income is not much. And this year also I think my gross income will be around 2.40 lakhs which will be below tax limit.

    My query is, will my deposited cash money counted as an income for this year Or my income will be counted as 2.40 lakhs only? Also is it mandatory for me to file the return this year?

    Thanks for all your help in advance.

    Reply
    • Neha-You no need to worry. Your income is never crossed the basic exemption limit. Hence, you not filed. But make sure to show your proof of income if IT Dept ask the source of the deposited amount. Again, this Rs.1.80 Lakh is below basic exemption limit. Hence, you no need to worry.

      Reply
      • Thanks for your answer. My income comes generally from adsense and few freelancing sites via PayPal. So I think i have proofs for that. But I dont have any source/proof of cash deposited money 1.80 Lakhs.

        Reply
      • Thanks for your reply, My income generally deposited in my bank from Adsense and few freelancing sites via PayPal. So I think i have proofs for them. But I dont have any proof or source for the cash deposited money which i saved from last few years. I hope that will not be a problem.

        Reply
  6. A minor above 10 year has a saving account operated by self. Can his grandfather deposit old 500 and 1000 in his account and how much amount he can deposit?

    Reply
    • Priya-There is no such limit. But if IT Dept scrutinize then the guardian must be in a position to inform the source of money deposited. Also, in my view the guardian’s consent letter required to deposit in minor account.

      Reply
  7. Hi dear,

    Let’s assume that I have Rs. 1,25,000 in cash that I and my wife have saved over some time, as we keep doing regularly. In a gullock and elsewhere. This amount is for LIC and other payments.

    Contributions are made out from the salary, as and when we get a chance. I don’t remember when we saved and how much we put in. But it’s all my salary savings.

    Hope there isn’t any worry in depositing the amount. As I mentioned, there’s not a penny by penny account but it’s all hard earned money.

    Suggestions required:
    1. Do I deposit in 1 account, 2 or more?
    2. In case I get a notice from IT, how should I be prepared for it?

    Thanks and regards,
    Vijay

    Reply
    • Vijay-1) If it is accounted cash, then in one account and no need to worry.
      2) They can understand the proportionate % of cash holding based on your salary income and the IT return you filed. They just catch BIG FISH.

      Reply
      • Hi sir,
        I have deposited Cash of rs. 200000 and 40000 in cheques and transfer 20000 frm my frnd. totally my deposits are 260000. From 9 th nov. To till now.soMy question is my above 2.5lkhs limit is taxable??

        Reply
        • Imran-Fund transfer and deposits are not taxable. However, you must show the source of cash if IT Dept ask you.

          Reply
  8. sir
    i have two a/c in one my wife in first name/second i am and in other a/c i am in first name/second name my wife.
    than can i deposit 2.5*2=5L yes or no

    KUMUD

    Reply
  9. Dear Sir,

    In my current account cash was transferred online, I have withdrawal cash by self above Rs. 1 Cr. before 8 nov 2 months back. Now I have no way to deposit the same cash in same account. Is there any loss to me for this ?

    Reply
  10. Sir, I have withdrawn cash by ATM of Rs. 450000/- from my salary account since April 2016…..can I deposit the same or less amount in the same account or different accounts? i do not want the hassle to get a notice from IT & then send all the explanation since whatever the query is…ultimately it becomes the source of corruption by IT officials. Please reply. Thanks

    Reply
    • Hemal-It is your accounted money and hence even if you deposit Rs.4,50,000 fully you have valid reason to show the proof to IT Dept. Why to worry?

      Reply
  11. Hi sir,
    Im paying every month around 12 thousands from my salary to chit fund of 2 lakh for 18 months and now the time got over.The financier is giving entire amount in old note.But I don’t want to take risk as I might get duplicate notes in that amount.W e ask him to give new notes.
    Now He has deposit that money to his account and he is asking 3 month time to give back the new note
    So my question is can he transfer that amount via online to my account, directly
    Is it gonna be problem??

    Reply
    • Safiullah-He is just cheating you by saying he will give ONLY old notes. If the money is already deposited in his account, then there is no harm in transferring to your account.

      Reply
  12. Sir, My husband lost job in Dec 2015. He has used his credit card to pay medical expenses for me. We have to pay around Rs. 75,000 for a credit card account. He has recently got a job, but we don’t have any savings as of now. Can anyone spare the amount (old notes 500,1000), as a loan at very less interest (1%) or no interest. We will provide valid id proof, pronote etc. , the loan will be paid back from May 2017.

    Reply
    • Priya-How can I help you? It is hard to get loan from unknown. Why can’t you approach bank?

      Reply
  13. Hi,

    i have taken personla loan of 10L 1.5 years back. can i clear that loan by depositing old notes of 1000 in the bank and clear the loan by paying the cheque..?

    Reply
    • Suresh-You have to deposit the same first at your account and from there you can clear off your dues.

      Reply
  14. we are a family of 3 (two working & one in business) each of us files IT return as individual and the one in business for his business as well. Apart from it we have one HUF, here again we file ITR. 4 of us (including one married) member I am the Karta. Three of us together have around Rs.9.25 in old currency, out of which 4.9 lakh we received as cash gift during marriage in Dec.15. Hence we have four identities paying IT & filing return 3 individuals + one HUF (ignoring the 5th one which is a PVT. LTD. Company). Pl. advise:
    1. should we deposit five go an amount less than 50 thousand each in each 4 accounts against 4 pan nos
    2. or equally divide & deposit lumpsum @ Rs.2,07,000 in each of 4 account
    3. can we also deposit in two ppf account of my wife in post office out of which one is recurring , yet keeping total aggregate less than 2,50,000 against one pan no.

    Reply
    • basavaraj ji pl. reply to above query

      Reply
      • Ajay-Why such worry and adjustment when you know that gift received during marriage is tax-free?

        Reply
  15. Basavaraj – Thanks for your valuable information and insight at the time of such a crisis. But, I think you have got one thing wrong. Since the limit for a single person(NOT ACCOUNT) is 2.5 lakh, mentioned in RBI’s FAQ page but somehow they have removed it in recent update (dont know why), thus if a person has 3 accounts in 3 banks with same pan card then the sum of all 3 accounts must be 2.5 lakh and if the total goes above 2.5 lakh then IT department will come knocking.

    Now, what you have been mentioning in the answers is if its accounted then no problem and in one answer you mentioned that yes one can deposit 2.5 lakhs in each account of different bank. But, I think you should make it clear for people regarding what the rule is and let people decide.

    Not everyone has every penny accounted for. For example, my mother has been saving money for maybe 15 years or more and when this happened she told me that she has 3.0 lakhs with her.
    Now, how am I gonna show its accountancy ? Simple answer is I can’t. There will be thousand of examples like this. And, if IT department just confiscates 50% – 90% of this hard saved money(not earned) then how will one feel !

    So, I request you to please clearly mention in your answers what RBI’s rule is and let these genuine people get a clear concept of it.

    Btw, I am a big fan of your blog. So, keep it up.

    Kudos.

    Reply
    • Shiraz-Thanks for pointing. But this post was published based on original notification. Hence, let us see the future. Regarding my comment, if you have accounted money of whether it is Rs.2.5 lakh or Rs.1 Cr, why you have to worry? Second thing, as per the original notification of RBI, if you deposit more than Rs.2.5 lakh within a bank (even though in different branches of same bank), then it will be reported. Based on that I answered in comments.
      Every deposit above Rs.2.5 lakh is not illegal or unaccounted. People just fearing.

      Reply
  16. Sir,last 7 years I am filing it returns. I have given 2 lakhs to my friends on oral agreement. Now if I take that in old 500/1000s and deposit in my SB account will it be a problem for me with it department?

    Reply
  17. Respected Sir.
    I am a door to door sales person of FMCG products. I buy the products daily from market in cash & also i sells in cash. I earn around 700 to 800 daily. Around 23000 per month. I Have have several consumer durable product loans from various financial companies, which is deducted from my bank saving acount in mode of EMIs. The total emi amount i pay is around 10000 per month.
    Now sir please suggest me is paying tax is applicable to me. Will my bank account transcaction will get detect by IT dept. How should i manage this.
    Thanking you Sir.

    Reply
    • Rajjak-You have to file IT return as your income is more than Rs.2,50,000. Whether IT Dept track your account or not is left with them. However, if your income is genuine, then why to shy away from declaring it?

      Reply
  18. Sir I have two accounts with same pan numberin different bank , is it possible to deposit each 2.5L. total 5Lakhs. Please give me suggestions.

    Reply
  19. Hello Sir,

    I have a query related to deposit:
    Say if a person has already high amount(say 10 lcas) in her savings account prior to the declaration of Banned (500,1000) note and she has deposited 2.5 Lacs on Nov 22 2016.
    My question is how IT team is going to track record for that person.Will they be checking the amount only that is deposited in between 08 Nov-31 Dec 2016 timeframe only or they will start tracking their investigation from the time when the savings account was opened and transaction process started happening?

    Thanks in Advance

    Reply
    • Vivek-They are concentrating on the money deposited during demonetization period.

      Reply
  20. Hi,

    Can i clear my citibank credit card outstanding of Rs. 2 Lakhs by cash by depositing old currency notes in citibank or if i am currently having any credit card loan running, can i repay and close that loan by cash payment directly in bank. I believe by doing this i am just removing my liability so should not be any income tax issue… please clarify.

    Reply
    • Pawan-Yes, you can. But if in future IT Dept ask the source of money, then you must have valid proof.

      Reply
      • Ok..thanks Basu. But my concern is that if i have already deposited 1,25000 in my savings account after 9th November and i do not have any other savings account and now if i clear dues of 100000 on my credit card by cash, it will still be under limit of 2,50000 (1,25000 + 1,00000 = 2,25000) so in this case, i should not be worried about any query/scrutiny by IT dept…correct ?

        Reply
        • Pawan-First understand that if your money is not unaccounted then YOU NO NEED TO WORRY. It is just a media hype that created that whoever deposit will receive IT notice. Persons have to worry who have unaccounted money.

          Reply
  21. Hi I am a house wife, I have already deposited 2, 2000 in my cooperation bank. I need to deposit another 2lakhs can I do it my another bank account which is in yes bank. Please reply

    Reply
    • Asra-Yes, you can do so. But the money is accounted, then you can deposit the same in Corp Bank also. If in case they ask the source, then you must be in a position to explain the source. Otherwise, use Yes Bank account.

      Reply
  22. Can i pay PPF of 150000 with old 500 and 1000 notes which were taken out from atm with different transaction? as my salary is in 20% slab and have been paying tax regularly. It will help me clear my old notes as well help me get tax exemption….

    Reply
      • As per govts latest notification , demonitised notes cannot be used for depositing in PPF / sukanya samriddhi scheme. Kindly clarify

        Reply
  23. Sir , I had given a Loan of 7 lakhs to a Lady by cheque in June & now in November , in spite of requesting her to repay me in cheque , she paid me 8 lakhs by old 500 & 1000 notes. Will this create problems for me , kindly please advise.

    Reply
    • Harish-You can show the transactions of you lent her and she return back.

      Reply
      • Dear Basavaraj , thanks for your above advice.
        she paid me 8 lakhs by old 500 & 1000 notes. Will this create problems for me , Can I deposit full 8 lakhs in my single bank – single account. Or do I need to split , between different banks – different aacounts.

        Reply
        • Harish-If you can easily defend the source of money you lent to her, then one shot deposit is not an issue. Otherwise think alternative ways.

          Reply
  24. can u give info reg exchange of 1000 500 notes by NRI s who carry small amounts abroad like 10000 t0 20000 while returning abroad to cover next years expanses of reaching home when they return the year following,if they cannot make it before 31sy dec

    Reply
    • Brinder-You can deposit to your NRE/NRO account. But it is not possible if you try to deposit after the deadline.

      Reply
  25. When you say in the example that, in case of multiple accounts, One can deposit upto Rs. 2.5 lakhs in each account and it will not be reported. So I have SBI, ICICI and HDFC A/cs, I can deposit totally upto 7.5 lakhs?
    Are you sure on this?

    Reply
    • Ratnesh-Yes. But it does not mean that by depositing in different bank accounts under the same PAN, your transactions will not be tracked. They may ask you the source of Rs.7.5 lakh. Are you able to show the real source? If so, then you no need to worry.
      These rules formulated in curbing unaccounted money.

      Reply
      • Thanks sir for replies..
        It’s always being a valuable learning experience with you.

        Reply
    • Exactly..That is what I am asking?

      Reply
  26. Dear sir..
    Thanks for info…read your article..
    Pl clarify one point…
    I am regular taxpayer and filing IT returns. My query is , can I deposit upto 2.5 lacs each and aggregating upto 10 lacs in my 4 different bank accounts and same shall not come under IT lens…is it workable.

    Reply
    • Sanjay-Is the money accountable? Is the 4 accounts within same bank or in different banks?

      Reply
      • Dear sir,
        All accounts are with different banks and I do withdrawn money from different accounts in last two years for personal use.
        Also if you could answer how much cash deposit can be done in my wife’s account while she is housewife but a teacher giving tuitions and dealing in cash…earning less than 2lacs annually…but not filing IT Returns.

        Pl Anwer my two separate queries.
        Thanks sir.

        Reply
        • Sanjay-If accounts are with different bank then each bank limit is Rs.2.5 lakh. You can deposit the cash in your wife account also. But what I am pointing is, if IT guys ask you the source then are you in position to defend? If it is not unaccounted money, then why to worry?

          Reply
  27. Hi,

    Thanks for the update on Which transactions reported to IT Dept?

    I have certain FD’s ( deposited i year back -sometime in 2015 ) also submitted PAN while FD creation which are around 4 lakhs out of which 2.5 lakh FD got matured during 10th Nov, however it has been auto-renewed from the bank.

    I have not deposited any amount during the period 9th nov 2016 to till date ?

    Will my earlier deposited amount details would also be reported it IT ?

    is 2.5 lakh limit is applicable only for deposits 9th Nov, 2016 to 30th Dec, 2016 or earlier deposits as well ?

    Please advice ?

    Thanks,
    Shravan

    Reply
    • Shravan-It is clearly mentioned cash deposits during this demonetization period. Along with that, the regular reporting will continue. The Rs.2.5 lakh limit is applicable to demonetization period only.

      Reply
  28. dear basavaraj
    thanx for value information through ur blogs
    I am going for registration of plot shortly. all dues have been paid to developers through CHEQUE ONLY prior to 08 nov 16.
    What are the tax implications?
    Pl advise
    Thanx

    Reply
    • Maqsood-It is as usual for you. No need to worry. Only currency notes of particular denominations banned.

      Reply
  29. DEAR SIR,
    WHAT ARE THE IMPLICATIONS IF MORE THAN 2.5 L IS DEPOSITED IN BANKS IN LOAN ACCOUNTS USING OLD DENOMINATION NOTES? ASKING ABOUT REGULAR TAX PAYER. WILL HE FACE ANY PROBLEMS BY IT DEPT?

    Reply
    • Rajesh-If the money deposited is accounted and you have valid reasons to show then you no need to worry.

      Reply
      • sir my in law is a heart patient and he kept old denomination notes of 3 L in his house for emergency. now its of no use to him. so he is willing to help me out to clear that loan. money from his side is accounted. if i take that help will i be in problem sir?

        thanks for swift reply sir
        regards
        rajesh

        Reply
        • Rajesh-It will not be a problem if you both have valid documentation to show the source for you and for your in law.

          Reply

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