Exchange of old Rs 500, Rs 1000 notes banned: Govt

New Delhi: The Central government on Thursday said that there will be no over-the-counter exchange of demonetised Rs 500 and Rs 1000 notes from midnight on Thursday, November 24.

Certain other exemptions relating to cancellation of legal tender character of old Rs 500 and Rs 1000 notes have been extended up to December 15, the government said.

So far, people could swap their old notes of up to 2,000 rupees per day. The government has decided that doing away with the trade-in will "encourage people who are still unbanked, to open new bank accounts”.

However, old notes can be deposited into bank till the end of the year.

The current limit on withdrawal of up to Rs 24,000 per week per bank account remains unchanged.

Extensions till December 15 include for payment of current and arrears of utilities limited to only water and electricity, the government said.

But old Rs 500 notes can be used at toll plazas from December 3 to December 15, the government said.

Payment of school fees up to Rs 2000 per student in Central, state, municipality and local body schools will also be accepted through old Rs 500 notes.

Payments towards pre paid mobile top-up to a limit of Rs 500 per top-up will be accepted through old Rs 500 notes, said the government. However, purchases from Consumer Cooperative Stores will be limited to Rs 5000 at a time.

Payments for the transactions under all the exempted categories will now be accepted only through old Rs. 500 notes, the government said.

However, notes of Rs 1000 denomination will no longer be used anywhere.

Prime Minister Narendra Modi earlier called a Cabinet meeting on Thursday night, possibly to discuss the penal 200 per cent tax that is keeping away the scrapped 500 and 1000 rupees notes from entering the formal system.

The meeting, summoned at a very short notice, comes amid reports of high tax penalty terrifying people from putting their cash savings into the formal banking system.

PTI said the government wants all of the Rs 500 and 1000 banknotes to be deposited and not burnt or destroyed for the fear of penal action.

The Income Tax Department had previously warned that cash deposits above Rs 2.5 lakh threshold post demonetisation decision could attract tax plus a 200 per cent penalty in case of income mismatch.

It was stated that the department was tracking all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account.

This had put a fear in people with reports of the banned currency even being destroyed.

Sources said the government may come out with a deposit scheme or an instrument like bond where the cash savings in the banned notes could be deposited.

Modi's November 8 shock ban on high-denomination currency notes had swept away 86 per cent of the currency in circulation in the biggest ever crackdown on black money, corruption and counterfeit currency. The move had led to Rs 14 lakh crore worth currency being withdrawn from circulation.