Rs. 500 and Rs. 1000 Currency notes No longer valid in India from November 9, 2016 – An Analysis

From midnight of November 8, 2016, Rs. 500 and Rs.1000 will cease to be legal tender. These notes are just papers from tomorrow,” said Prime Minister Mr. Narendra Modi.
The announcement was made to combat black money, corruption, counterfeit currency notes and terrorism financing, etc. All electronic transactions, cheques, debit cards, internet banking, cash, demand draft transactions, e-transactions on account of business firms, companies and individuals will continue.
Banks will be closed on November 9. The ATMs will not function till November 9, and in some places till November 10. A new series of Rs. 500 and Rs. 2000 currency notes with better security features will be brought into circulation.
There is no restriction of depositing the Rs. 500 and Rs. 1000 currency notes in the bank account. However, there would be restrictions on withdrawal of cash from the account of Rs. 10,000 per day or Rs. 20,000 per fortnight until November 24, 2016. Thereafter the limit would be enhanced.
Also, these notes can be exchanged in banks and post offices from Nov 10, 2016 to Dec 30, 2016, by providing a valid identity proof (Aadhar, PAN or voter ID). After December 30, 2016, currency notes can be exchanged at RBI by providing a declaration until March 31, 2017.
Please keep in mind that RBI will monitor and regulate the printing and circulation of Rs. 2000 notes. Also, the banks will have video cameras for all transactions and share info with Income Tax dept. as deemed fit.
The 500 and 1000 currency notes will still be able to used for 72 hours at:

  • Government Hospitals and pharmacies in these hospitals,
  • Ticketing counters – Railway, Buses, Airlines,
  • Consumer co-operative societies, milk booths for purchases,
  • Crematoria/burial grounds,
  • Petrol/diesel/gas stations of Public Sector Oil Marketing Companies,
  • International airports for arriving and departing passengers,
  • At airports for foreign tourists to exchange foreign currency at airports.

What to Do?

  1. If you have accounted or official money in cash (you can prove the source and is reported to Income Tax): NO NEED TO WORRY. You may deposit in the bank until Dec 31, 2016 and replace from RBI after making a declaration until March 31, 2017 WITHOUT LIMIT.
  2. If you have unaccounted money:
    1. in Cash (less): The money can be exchanged from any bank  until Dec. 30 after giving documentary evidence. There are certain limits on a daily transaction and RBI/ IT would be monitoring who is coming to exchange the currency notes.
    2. in Cash (high): Need to be innovative in use of cash immediately (within 1-2 days) or they would be worth “raddi” or “pasti”.
    3. A lot of NRIs may also have cash in the lockers or at home or with someone. They would need to visit India immediately or it would just be paper. Only 50 day window to exchange the currency notes to Bank or to make a declaration to RBI and exchange by March 31, 2017.

Effect on Investments:

  1. Real Estate: As cash or unaccounted money is predominantly used in property transactions, Real Estate Market will be worst affected. I expect the real estate prices to go down and to remain subdued in the time to come.
  2. Gold: The gold would be second most affected as there are mainly two investments where the unaccounted money or cash is invested. I would expect the gold demand to decrease and price may fall.
  3. Bank FD/Debt: There would be in inflow for FD or debt investment from the investor who does not want to take any risk and need protection or secured return. However, as RBI has been decreasing interest rates, the return would not be attractive (only 7% now) and investor may need to look for other avenues. However, I would expect investment in Bank FD or Debt to increase and interest rate would go down further.
  4. Equity:Market will be very volatile due to US elections as well as ban on use of 500 and 1000 rupee notes in India in short term. I expect the market would go down and may be chaotic this week and next.However, in the long run as more and more investments come pouring in or reducing allocation in real estate or gold, I expect the equity market to benefit. Also, as India is making steps in right direction, the equity market is expected to gain over a long term.

Please post your comments on the subject below.

About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.


  1. I am in USA and have 1000 INR notes which I have from my visit to India in Feb 2016
    I am not planning a visit there anytime soon, no bank/ currency exchange here would take INR ” until further notice”. Please advise about other options – is there a way to buy $ with INR sometime in the future?

    • You may give the currency notes to your friend or relative with an authorization to deposit the same in your account. Else, you would have to come personally to India and deposit the same yourself. Thanks.

      • I am also an NRI with money left over from a Feb 2016 visit. I am planning to visit India in Jan 2017 again. Can I make a declaration to RBI before Dec 31 and then deposit the money in January? How does one make a declaration? Is there a form? Where do we send it?
        Alternatively, I can give the money to my brother who is visiting the US right now. What kind of authorization do I need to provide so that he can put the money in my NRI account in India?

        • You have until March 31, 2017 to make a declaration to RBI. So when you visit India in January, you may visit the RBI office, provide the proof of source, make declaration and deposit/ exchange the currency. Currently, bank are depositing any money over 50,000 provided there is any source – withdrawal from NRO account or rental/ any other income or currency exchange. For any deposit by anyone other than you (e.g. your brother), an authority letter may be required. However, the rules are not consistently applied for authorization or source requirement so you are requested to contact your bank and ask for any clarification. Thanks.

  2. How much money can I deposit/exchange in my savings account, As I don’t fill any ITR , to be on safe side

    • There is no limit if the money is official and you can prove the source. Anyway, I think it is fair to assume that one may have upto Rs. 50,000 at home and okay to deposit. Thanks.

  3. I have large unaccounted money over the past 25 years(over 25 lacs) sitting at my relatives home. I do have NRE/NRO account with over 18 lakh sitting money in it. In 2008 i have sent officially 25000 dollars officially via bank draft and invested money without paper trail. Can i go and deposit this large sum of money into my NRE/NRO account. I do not mind paying tax on interest I earn. Appriciate your help. Great site.

    • You need to define the large unaccounted money and be ready to prove the source. Please note that any deposit of Rs. 250,000 in the savings account is being tracked by the IT and if you deposit more than Rs. 10,00,000, you would get a notice as it is reflected in the AIR – Annual Information Report (now Statement of Financial Transactions and Reportable Accounts). Unless you can prove the source, I would not recommend depositing it in the bank account. You need to find other avenues very fast. As per the news reports of Nov 10, unaccounted money is being discounted by 40%, which will surely become 0 on Dec 30, 2016. Thanks.

  4. Hi ,
    I am a NRI and i am having 50 lacs as a cash which was transferred from overseas to my NRI account and then lended it to my brother in law. Now he is returning back my money back as a cash. Will there be any impact if deposit this money back to my Savings account in India.
    Please help.

    • It would depend whether you withdraw cash from your bank account and gave the funds or transferred via cheque. If you withdrew, I don’t think it is a problem as you can deposit the same in the bank account before Dec. 30, 2016. However, the Income Tax department would issue a notice and scrutinize your case. If you had transferred the amount through cheque, you can accept only as cheque and may not deposit the same in the bank account. Thanks.

  5. Hi Jigar,
    I also have similar question as my other NRI brothers. (25 Lacs+) My own savings plus accumated money from Loans I have given to friends for business.
    For large sum of deposit how can I show source of income?
    Also can I ask my parents to deposit that money under Liberalised Remittance Scheme?

    • 1. There is no deposit under LRS. LRS is for your parents to remit money outside India. It is a withdrawal facility and not deposit facility for residents.
      2. You would need to have a source – cash withdrawal from bank account (recently or at the time of giving loans) or income or currency exchange or gift before depositing the money into NRO account. However, a bank may accept credit upto certain amount without source.
      3. For any deposit above 2,50,000, please note that information will be shared with the Income Tax department and you would likely get a notice to explain the credits and/or the source. Thanks.

  6. Hi
    i am Nri and living in Dubai since 10 years. today i attend one seminar in dubai and ask question to one of reputed CA from india..that how much cash i can deposit in my Nro account.he told me since you opened Nre And Nro account and whatever cash you have withdrew during last 10 years( i have nre/nro account since last 10 years) can deposit back that amount..pls asvice..

    • I don’t think you can deposit all the money withdrawn in last 10 years. Only savings from the money withdrawn can be deposited. If you have not spent the money, there is no reason for you to withdraw again so I would not recommend. I think the withdrawal from last 1 year or last couple of withdrawal can be deposited. Currently, as per my discussion with NRI managers of various banks (as on Nov 11), banks are requiring evidence of withdrawal of last 1 year or declaration of any rental or other income as proof for depositing in NRO account. Thanks.

  7. Jigar Patel Sir – Just 2 common sense questions.
    1. My parents have rental income of around 5 lakhs per annum between them, and they have showed it in their tax returns. They take the rent in cash ( below 20,000 ) and just keep it at home. But there are no rental agreements of monthly rental receipt vouchers with the tenants.
    Now they have been stashing this money for a couple of years now, and the amount is well around 7 to 8 lakhs. They have declared this amounts in tax returns, but have not deposited in bank account. And there is no paper work.
    Now, if my parents go ahead and deposit 4 lakhs each in their bank accounts, will they be inviting scruitiny ? How should tbey justify that infact this is declared money ?
    2. Every household has some money in cash 50,000 to 1.5 lakhs. During birthdays or saree functions the money given as blessing by the guests will itself amount to a few lakhs, atleast 1 to 2 lakhs. What do we do with this money ?
    To be specific, if we deposit such money around 1 to 1.5 lakhs, will we still be required to justify and provide explanation ? What do we say ? This is the money gifted on my kids saree function by guests ??

    • 1. If your parents are reporting the rent as income in their income tax return, it would be okay to deposit the same in the bank account. However, as they are filing tax return, cash on hand may also need to be checked. They may deposit the money upto the balance of cash on hand. I would not recommend depositing 4L each if cash on hand balance is less.
      2. Yes, but the household also does expenses in cash. Only savings from the cash received can be deposited in bank. Any gift from non-relatives (friends or not a relative under IT definition) more than 50000 is taxable. I would recommend you contact your CA and seek his advise. Thanks.

      • Thank you, Sir.
        So is it ok to deposit around 2.25 lakhs on each of my parents name ? The rents collected in cash this year itself will amount to such an amount on each of my parents name.
        Everymonth my parents give rent received receipts to the tenants, but dont keep a copy with them. Should we collect a copy of such receipts starting this financial year or the last couple of years ?

        • For a proper guidance/answer, Please post question with the correct name and email. Thanks.

  8. Hello,
    My uncle is a businessman and has money in cash of Rs. 7 lac to pay third party ,but now third party is not accepting cash.
    he can’t deposit whole cash in current account bcoz he is unable to show evidences to IT department.So, plz kindly suggest any cash adjustment source.
    Thanks in advance

    • Unfortunately, he would need to have a source. He may report cash income and as cash on hand and may deposit. However, he is requested to contact his CA for the same. Thanks.

  9. Dear Jigar Sir,
    Your blog is very useful and clears all doubts for NRIs. I a NRI and living in UAE. I had done cash withdrawal from my NRE account from year 2013 to 2015 around 20Lack Rs for my family in India. Now Old 500 and 1000 rs notes are no legal tender. My family still have 14Lack cash. Can I personally deposit that cash in to my NRO account in India? Is there any Tax implications? can I submit the statement from Year 2013 to 2016 to show the source?
    Pls. advice. Thanks in advance..

    • I think you may be able to deposit the same to your NRO account. You may submit the bank statement as proof if required. Please contact your bank to understand the procedures. Also, please note that the deposit will be reported to the Income Tax department and you may get a notice to explain the source. Thanks.

  10. Mr Jigar, I am an oci holder from U.K. I have an nre account with SBI.
    I have sent funds over 50 lakhs since 2010 until 2015. They’re already taxed in U.K.
    I have transferred, written cheques & also withdrawn personal cheques from my nre account to give money to my relatives (cousins) for footing medical bills, family maintenance & functions etc. all without any interest. Now they are in a position to return some of this money back in cash. What should I do to receive this money without any problems with the income tax department. I am now working in India since 2014, & pay tax as an employee in India. What type of Incometax enquiry should I expect, I.e what questions? And about the source of income, should I show them my income tax filing from UK ?

    • Ask your relatives to return the money in cheque. I would not recommend accepting cash now as old 500-1000 rupee notes are no longer legal tender. Also, you would have given the loans by cheque only. You may deposit the case based on the available balance as your cash on hand. Thanks.

  11. Dear Sir,
    I have joint account with my Minor Son, what is the maximum limit to deposit in joint account without any Income Tax implication?..Pls.reply. Thanks..

    • Based on the amount on your cash on hand. If your son is the first owner, it is considered his account and may deposit money that belonged to him. If you are the first owner, you may deposit the amount as per your cash on hand – income, cash withdrawal, gift, etc. Thanks.

  12. Hello
    We are NRI’s. me and my spouse invested in plot 3 years back.We transferred to our parents account and they paid cash for the plot.We bought that for 1 cr and now we sold it for 1.30cr. unfortunately after selling the plot cash ban decision was made by the government.
    can we deposit this big amount in our NRO/NRE account?
    Please explain the options available for us. Appreciate your response.

    • 1. NRIs are not allowed to invest in any other person’s name. It is called a benami transaction and not allowed.
      2. You may not deposit the amount as the bank would ask for the source. Also, any deposit more than 2.5L would attract any scrutiny or inquiry by the IT department. IF found that you had not reported the income, you may be subject to tax, interest and penalty. Thanks.

  13. Hello
    we live in US.We invested in India with our earnings.We transferred around 70 lakhs to India in last 1 year to our parents account.They have purchased a plot for us which costs around 70 lakhs. Now we sold that plot and got 1 cr. Unfortunately the government made cash ban after selling the property.Registration cost of that plot is around 30 lakhs.
    Can we deposit that 80 lakhs in our NRO/NRE account?
    Please tell us the options we have in this case. Thanks in advance!Appreciate your help!!

    • 1. The nature of transfers need to be determined. The transfer from you to your parents would be a loan or a gift. If gift, it is not your money. You have no right. If loan, the loaned amount can not be invested in buying plot. Also, an NRI can not invest in others name as it is considered as a benami transaction.
      2. For depositing money into NRO, you would need to provide the source of funds. Bank would ask for the source or declaration of income before depositing the money. Also, any deposit over 2.5L in a saving account will be reported to the IT department and you will surely get a notice for the same.
      3. As you do not have an official source, you may not be able to deposit the same into your bank account. Unfortunately there is no other way. You may hope that the government come up with a disclosure scheme to pay 50-60% tax, disclose the amount, pay the tax and then credit into NRO account. Thanks.

  14. I am an NRI , have around 1.5 lakhs of unaccounted cash ,
    through piggy bank and lent to friends long back ,
    since the sum is small can i deposit in NRO account without any issue ?

    • While you may, if inquiry, you may need to explain/ prove the source. Some banks do ask for source at the time of depositing i.e. any withdrawal from NRO account, declaration of income received in cash or exchange of foreign currency into INR. Thanks.

  15. Hi,
    My brother is a NRI (saudi) and i am an Indian.
    We both want to deal in cryptocurrency as a business (in india) or for a short term 2-3 times.
    We want to buy it from my brother’s country (saudi) and sell it here in india and send the money back to my brother account (in saudi) and again buy it and sell in india (LOOP)
    1) So what are the best possible way to send the money from here to there ? fast and legal.
    2) What kind of Business will it be (categorically) and do we need any legal formalities to do this legally ? (e.g forex)
    3) What kind of Tax will be attracted and on which amount the tax will be attracted ?
    4) Where can i get complete info on TAX, BUSINESS, LEGAL FORMALITIES of CRYPTOCURRENCY or Virtual Currency india ?
    5) Do you have any comment on cryptocurrenct (bitcoin) related to India law,regulation,tax etc

    • 1. You would need to determine the structure of your business e.g. partnership, company, etc. of your venture. Also, FDI rules may apply if investment is to be made from outside India.
      2. There are certain restrictions on the activities of NRIs. I know NRIs may not do chit fund, or any financing but not sure about the trading in crypto currency. I suggest to contact a person dealing in the field. Thanks.

      • Thanks for the reply.
        How can i collect info on how the company in india operates
        Zeb pay , Coin secure and uno coin. Because i have similar thing in mind. (closely related to forex too)

        • I think you would need to do the market and competitor analysis and know the information of the companies. Sorry, I do not know of such companies. Please note that you also need to check the FEMA or RBI laws if involved in forex or cyrpto currency respectively. Thanks.

  16. I am a NRI and accepted about 1.5 crore of my brother’s black money into my NRO account. When this initially happened, I was told that NRI accounts are not impacted by the change and hence decided to help my brother out. What are my ways out of this? I also found out now that this will get reported in the US too due to the recent tie ups. Please suggest.

    • 1. My comment would depend on whether you deposit the cash into your NRO savings account or received via cheque or money transfer from third person.
      2. Assuming you deposited the cash, this is very risky. However, I would suggest you to disclose the same and pay 50% tax. For US reporting, you would also need to report it as your income and pay the tax. You may get a credit for tax paid in India. However, please contact your CPA.
      3. If the money was credited via cheque or wire transfer, You may consider it as a loan and return the same to your brother or the third party. You may report the same as loan to IRS.
      4. If you need help with the investments or any question, please contact us. Thanks.

  17. Dear Gigar Patel
    I am nri uk res. I read your very informative FATCA report. I would like to contact your office.
    Thanking you

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