The abolishing Rs.500 and Rs.1000 notes will have serious impact in the day to day life of the people in the short term. The money circulation will come down heavily in the next few days. Government has to replace about 2300 crores of currency notes. Rs.500 and Rs.100 notes account for about 86% of the currency in India by value. This will be about Rs.15 lacs crores as per the latest reports from RBI.
Today ATMs are closed. From tomorrow a person is allowed to withdraw only Rs.2000 from ATMs for few days. The old currency notes can be exchanged for Rs.4000 worth new currency notes only in a day. A person is allowed to withdraw only Rs.10000 as cash using cheque in a day from the bank and it is limited to Rs.20000 in a week.
It will be good if people take care of the following in the next 1 to 2 months’ time:
- We use cash for many purposes like paying for vegetables, fish, meat, hospital expenses, buying medicine, paying for services of mason, carpenter, coolie etc. First priority should be to preserve cash. Only use cash to buy things which are essential. Any big spend like repair works where cash has to be paid may be postponed.
- Try to use debit card as far as possible while purchasing in super markets or for bill payments.
- Avoid long travels particularly for holidays as most often cash is mainly used on such occasions
- Try to postpone big events by 1 to 2 months if cash is required to pay for various expenses.
- If you are used to making chit payments or repaying some borrowing in cash, give cheques in the place of cash or do fund transfer to their bank account either through bank branch or netbanking.
- If you have invested in stocks do not panic and sell at a loss. Wait for the markets to recover.
- If you have higher number of Rs.500 and Rs.1000 currency notes, deposit them in your bank accounts rather than waiting on long ques to exchange for Rs.4000 worth notes. There is no restriction for depositing cash in your account.
- If you have received large amount as cash in real estate transaction or gold sales, you should deposit that in your bank account. You will have to give your PAN for any cash deposit above Rs.50000 in a day. You should consult a chartered account who will help you file your tax returns. You may have to pay tax but it is better to pay tax than losing your money.
- There may be touts approaching you saying that they will take your currency notes for lesser value like Rs.500 notes for Rs.100 or Rs.200. Do not fall into such offers. Those are illegal deals. Paying tax will be cheaper and give you peace of mind.
- If somebody asks you to deposit their cash in your bank account and later withdraw cash and return to them, please do not do it. Tomorrow you will be answerable to the tax authorities for the source such money
The above is the English transcript of the article published in the Mathrubhumi E-paper dated, November 11 2016, written by Sanjeev Kumar G, Certified Financial Planner, Prognoadvisor.com