Penalty for old notes? Cabinet to take up Dec 30 cut-off ordinance today

Such a move will help bring a much-needed clarity to the centre's estimates of demonetised amount

The Union Cabinet is likely on Wednesday to take up an ordinance to extinguish the old Rs 500 and Rs 1,000 notes not returned to banks by Friday, December 30.

Such a move will help bring a much-needed clarity to the centre’s estimates of the demonetised amount that has come back to the banking system a senior official said. The ordinance will likely specify December 30 as the deadline to deposit the old Rs 500 and Rs 1,000 notes that the government had rendered invalid with Modi’s announcement on November 8.

"It is important to specify December 30 as the deadline as we will count the money till that date that has come back to the banking system for our future calculations,” the official told reporters in New Delhi and added that this would bring more certainty to the Budget calculation for 2017-18.

“If we do not put an end date on the legal character of the old notes, they can be infinitely valid as a legal tender. The government wants certainty on the estimate of the money flowing back. A cut-off date for all deposits will help,” the person said.

It was said by the Prime Minister himself and top that there would be a three-month window from January 1 to March 31, wherein old currency notes could be deposited in specified offices of the Reserve Bank of India (RBI) after filling a declaration form. The official said that window would remain open but only for ‘exigencies’. 

There were reports that the ordinance might have penalty provision for anyone possessing the junked Rs 500 and Rs 1,000 notes beyond December 30, to be imposed on anyone holding more than 10 notes each of the old currency.

Asked, the official said, “The problem is not someone holding 10 notes in old currency beyond December 30 but if someone is holding, let's say, Rs 5 crore, it's a problem and the person owes an explanation.”

In the previous demonetisation in 1978, by the Morarji Desai government, a similar ordinance was issued to end the Centre’s liability on the demonetised Rs 1,000, Rs 5,000 and Rs 10,000 notes. 

On November 8, Prime Minister Narendra Modi’s announcement had, in one swoop, demonetised Rs 15.4 lakh crore worth of notes. RBI stated that as of December 10, Rs 12.44 lakh crore in old notes had been deposited or exchanged by the public. No data on deposits have been made after that date.

For those depositing any unaccounted funds, the government has offered a second chance to come clean through the Pradhan Mantri Garib Kalyan Yojana, open from December 17 till March 31. Under this, 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 an interest-free deposit scheme for four years.