How Rs 2,000 bank note exchange can bring tax notice at your home?

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Several people are confused by the decision of Reserve Bank. Some are calling it mini demonetisation. However, there is no need to worry because Rs 2000 notes are still in circulation. Not only this, there is still enough time to exchange or deposit money. One more thing, you don’t need ID proof or to fill any form to exchange notes. However, even after this, 2000 rupees can be a reason for Income Tax Department to send you a notice.

After demonetisation on November 8, 2016, Rs 2,000 notes were issued to meet the cash requirement. According to RBI, the printing of Rs 2,000 notes has been stopped since 2018-19. As on March 31, 2018, a total of Rs 2,000 notes worth Rs 6.73 lakh crore were in circulation, which came down to Rs 3.62 crore as on March 31, 2023. During this period, its share in the notes in circulation came down from 37.3 per cent to 10.8 per cent.

Now coming to how the notes can be changed..You can go to any nearest bank branch and exchange Rs 2000 rupee notes or deposit them in your bank account. For this, the Reserve Bank has given time from 23 May to 30 September 2023. A maximum of 10 notes can be changed at a time i.e. maximum 20 thousand rupees can be changed at a time. However, there is no limit on depositing these in the bank account. Note exchange facility is available in the bank as well as in 19 regional offices of RBI.

Those who have a few Rs 2000 notes need not worry. People who have a lot of cash lying at home, are the ones who may actually face problems. Too much cash means too many notes. Since only 10 notes can be changed at a time, it is easy to deposit them in the bank account if there are many notes, because there is no limit to depositing notes in the bank account. You can deposit as much as you want. But, on depositing 50 thousand or more cash, PAN number has to be given. In such a situation, information about your money will reach the Income Tax Department.

The Income Tax Department keeps an eye on big transactions, especially big CASH transactions. In such a situation, it is possible that the department may send you a notice and ask the source of funds. If you also have a lot of cash in the form of 2000 rupee notes, then before depositing them in the bank account, keep proper documents ready about the source of the money.

Now you might have a question in your mind that how will the Income Tax Department know about how much money you have deposited? The answer is Statement of Financial Transaction i.e. SFT. If you deposit Rs 10 lakh or more in cash in a savings account in a financial year, then the bank has to give this information to the Income Tax Department, whether the transactions are done from one account or multiple accounts. In case of current account, this limit is Rs 50 lakh or more. Banks give information about such transactions with high value in SFT, so that the Income Tax Department comes to know about it.

The Income Tax Department uses the SFT to match your expenses, deposits or investments with the income declared in your Income Tax Return. In cases discrepancies are found, the department may issue a notice to the depositor for further information or clarification. In such a situation, if you are  depositing more money in the bank account, then keep a complete record of its source. Department can take action if it is not satisfied with your answer.