Home > ₹2000 currency note withdrawal Last Updated: May 20th 2023
Businesses and consumers are affected by the Rs. 2000 banknote withdrawal. Understand the context, withdrawal reasons, and deposit/exchange method.
On the evening of May 20, 2023, the Reserve Bank of India (RBI) issued a press release titled Press Release: 2023-2024/257 regarding the withdrawal of the Rs. 2000 banknote from circulation. The note includes the context, the reasons for the withdrawal, and the deposit or exchange procedure.
“in pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, the ₹2000 denomination banknotes shall be withdrawn from circulation. The ₹2000 banknotes will continue to be legal tender.”
In addition, the RBI has instructed all banks to cease issuing 2000 banknotes with immediate effect.
The original goal of introducing 2000 banknotes was achieved when sufficient quantities of banknotes of other denominations became available. Consequently, the production of Rs. 2000 notes ceased during the 2018-19 fiscal year.
The total value of Rs. 2000 banknotes in public circulation has decreased to approximately 20 percent in value, and the denomination is rarely used in the transactions.
Despite the fact that this was not stated in the RBI note, it is widely believed that the Rs. 2000 was used to store illegal funds and real estate deals.
Due to the aforementioned causes, the RBI has issued a press release regarding the withdrawal of the 2000 banknote from circulation; the banknote will continue to be legal tender.
May 23, 2023
From May 23, 2023 to September 30, 2023 (4+ months), a person or business can approach a bank or any of the RBI's 19 Regional Offices (ROs) to facilitate an exchange for other denominations, such as Rs. 500 or Rs. 100, or a deposit into their bank account.
Subject to compliance with KYC standards and other income tax regulations, "deposits made into bank accounts" are permissible without restrictions. However, one can "exchange" 2,000 banknotes up to 20,000/- at a time.
No, there are no fees associated with the exchange or account deposit.
While there is no explicit language in the RBI press release, it is evident that after September 30, 2023, the Rs. 2000 banknote will no longer be legal tender. Essentially, there is no value after September 30, 2023. In the coming months, RBI may extend the deadline for such an exchange or provide additional clarification.
Certain businesses like real-estate, mandis, markets may do lot of cash transactions, though the public is started using UPI even for larger transactions. Such businesses may need to deposite large cash like 2 crores etc.
While depositing more than a crore in the Rs. 2000 denomination has no restrictions, withdrawal of such cash from the bank account to use for it's operations under go Section 194N
If the taxpayer is filing his income tax returns regularly: 2% on the total cash withdrawal exceeding Rs 1 crore to be withheld by the bank or financial institutions as TDS.
If the taxpayer is not filing his income tax returns regularly: 2% TDS to be levied on 20 Lakhs to 1 Crore and 5% TDS to be levied on cash beyond 1 Crore
To discourage cash withdrawals from banks, post offices, TDS is introduced u/s 194N. Learn more on applicability, exceptions, tds rates due dates, tds returns. Section 194N is effective from 01st September 2019 and applicable in the above context.
Know more on TDS on Cash Withdrawals u/s 194N
GST Accounting Software Price: FREE for 1st year in India refer pricing for other countries such as India, Australia, Malaysia, Nepal, Pakistan, Singapore, Sri Lanka, & UK
Easiest GST ready Accounting software