₹2000 banknote withdrawal from Circulation in India

This document covers

1. RBI statement on the withdrawal of the Rs. 2000 banknote from circulation.
2. Why are Rs. 2000 notes being withdrawn?
3. When does currency note exchange begin?
4. When must a Rs 2000 note be deposited or exchanged?
5. What is the daily limit for depositing Rs. 2,000 note into a bank account?
6. Does the public need to pay any fees in order to deposit or exchange?
7. Do we need to Quote PAN when depositing ?
8. What will happen if one is unable to exchange the currency or deposit in to a bank account ?
9. What's the impact of depositing large cash in Rs. 2000 notes and withdrawal later to use?

1. RBI statement on the withdrawal of the Rs. 2000 banknote from circulation.

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“in pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, the ₹2000 denomination banknotes shall be withdrawn from circulation.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.

2. Why are Rs. 2000 notes being withdrawn?

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.

3. When does currency note exchange begin?

May 23, 2023

4. When must a Rs 2000 note be deposited or exchanged?

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.

5. What is the daily limit for depositing Rs. 2,000 note into a 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.

6. Does the public need to pay any fees in order to deposit or exchange?

No, there are no fees associated with the exchange or account deposit.

7. Do we need to Quote PAN when depositing ?

Per Shaktikanta Das, Hon'ble RBI Governor, made a statement on 22nd May 2023, that Quoting of PAN number is mandatory if the total deposit amount exceeds Rs. 50,000. Which is a known guideline for the banks and other financial institutions as per IT Act.

8. What will happen if one is unable to exchange the currency or deposit in to a bank account ?

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.

9. What's the impact of depositing large cash in Rs. 2000 notes and withdrawal later to use?

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 deposit 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