The government is planning an ordinance or executive order to bring a new law under which possessing, transferring or receiving an amount of over Rs. 10,000 in banned 500 and 1,000-rupee notes will be a punishable offence. The maximum number of banned notes, of any denomination, that a person will be allowed to have is 10.
The ordinance has to be issued before December 30, the deadline for people to deposit old notes that they holding in their bank accounts, sources said. The penalty for breaking the proposed law is still to be firmed up, but sources said a fine of a minimum of Rs. 50,000 or five times the amount in question – whichever is higher –is under consideration. There will be a criminal liability and a municipal magistrate will hear cases involving violation and decide on penalty.
The draft ordinance includes recommendations of the central board of directors of the Reserve Bank. After December 30, banned notes have to be directly deposited in the Reserve Bank of India or RBI and a grace period will be specified later. Prime Minister Narendra Modi banned 500 and 1,000-rupee notes on November 8 with an aim to flush out black money and stop money laundering and counterfeiting of notes.
The move took out 86 per cent of money in circulation or Rs. 15.44 lakh crore. More than 13 lakh crore in old notes has already returned to the banking system in deposits, the RBI has said.
The government has offered a one-time window for people to deposit their undeclared money in old notes and pay 50 per cent in tax and penalty.
If they are caught by the taxman, they will pay almost 90 per cent of the amount they have.