The Govt. decided to discontinue with the legal tender character of the existing High Denomination Bank Notes (HDNs) of Rs 500 and Rs 1000. This decision has been taken to curb financing of terrorism through the proceeds of Fake Indian Currency Notes and for eliminating Black Money. Old HDNs can be exchanged or deposited in banks till December 30, 2016. As per the existing provisions of Rule 114B, customers have to furnish PAN for cash deposits above Rs 50,000 per day. As per provisions of Rule 114E, the banks were required to report all cash deposits above 50 lakhs in current account and all cash deposits above Rs 10 lakhs in saving accounts in a financial year.
Now after the demonetization of currency, people are splitting-up their black money by depositing cash in several accounts of third parties (viz, accounts of their friends, employees, relatives). They are depositing cash less than Rs 50,000 per day and in aggregate less than 10/50 lakhs.
To curb such unscrupulous practice of such people hoarding black money, the CBDT has amended Rule 114E to provide that all cash deposits in saving accounts above Rs 2.5 lakhs during the period 9-11-2016 to 30-12-2016 will be reported by banks to income-tax department in AIR (Known as ‘Statement of Financial Transactions’).
Further all cash deposits above Rs 12.5 lakhs in current accounts during the period 9-11-2016 to 30-12-2016 will also be reported by banks to income-tax department in AIR. Further, the CBDT has mandated furnishing of PAN by customers for any cash deposits above 2.5 lakhs during the period 9-11-2016 to 30-12-2016 in bank account.