Sunday, November 27, 2016

7 Points NRI should remember while depositing/exchanging old Rs 500 and Rs 1000 Notes

If you are like many NRIs which keeps some amount of cash from 2K to 25K in denomination of Rs 500 and Rs 1000 notes which are now banned in India and thinking to either exchange them for new notes or deposit in their bank account, so that you can withdraw them later using ATM, then this post is a must read for you. In this article, I am going to share 7 important points every NRI should know and remember who is thinking of exchanging or depositing old Rs 1000 and Rs 500 notes.

As many of you might be aware that it's not possible to exchange or deposit old notes outside India as both money exchange houses and overseas branches of Indian banks e.g. State Bank of India, ICICI bank, Axis Bank, Bank of Baroda, Federal bank, Axis Bank, Kotak Bank and YESBank are not accepting old notes.

You can't even deposit them into your NRE/NRO account overseas, so only way to convert or deposit them is either personally visiting India or authorizing someone you trust and who is visiting India before 30th December. Even though the last deadline is 31st march 2017, the exchange will only happen in RBI offices and you would probably require more paperwork then if you do before 30th December 2016



What NRI should know about deposit/exchange of old Rs 1000 and Rs 500 notes

Here are my seven points related to exchange, conversion and deposit of old high denomination notes (Rs 500 and Rs Rs 1000) which I believe every NRI should know and remember to avoid losing money and facing more hassle when they go for conversion post first deadline.

7 Points NRI should remember to convert old Rs 500 and Rs 1000 Notes


1. NRIs can only exchange or deposit old notes in India
This is true unless the government comes up with any new directive to authorize overseas branches of India banks, both public and private sector, the only way to exchange or deposit old notes is in branches of any bank in India. The deadline for this is 30th December 2016 and after that notes can only be exchanged or deposited on RBI branches until 31st March.


2. They can authorize someone to deposit or exchange notes on their behalf
This is the only silver line in this whole demonetization exercise for NRIs. Since it's not practical to travel India to exchange or deposit those 5K or 10K worth of notes, many NRIs are currently authorizing their friends and colleagues who are visiting India to deposit their money into their bank account. If you are not that lucky to travel India until 31st March then be prepare to write off that small cash, which many more NRI will do given the high cost of flying to India from Overseas without any other reason then demonetization and cash exchange. So far, this is the easiest way to deposit old Rs 500 and Rs 1000 notes into the bank.



3. May need to produce documents showing source of funds at bank for high-value transactions
If you are going to deposit more than 2.5 lakh of old Rs 500 and Rs 1000 notes then are prepared to show document indicating source of income e.g. if you have withdrawn 5 lakh for wedding or festival spending from your NRE account and 2.5 lakh from that is the remaining money then you can show the bank transaction that this money is from your NRE account. Though you must remember that you cannot deposit Rs 500 and Rs 100 cash into NRE account, because NRE account doesn't accept INR, hence the old Rs 500 and Rs 1000 notes can only deposit into NRO account.


4. Bank may file a Suspicious Transaction Report if documents are not satisfactory
This is the risk of depositing high-value cash in Rs 500 and Rs 1000 notes, if your explanation and documents are not satisfactory then the bank can file Suspicious Transaction Report to question more about the source of income of that cash. Remember, the whole exercise is to unearth the black money.


5. FEMA norms restrict NRIs to take only up to Rs 25,000 outside India
This means you cannot say that you took more than 25K outside India as cash, so if you do a high-value transaction you have to tell from where did you get the money e.g. selling a property or as rental income or anything else.



6. For deposits over Rs 2.5 lakh, they can get a notice requiring them to disclose source of funds and/or file returns
This is similar to point 4 if you are depositing more than 2.5 lakh in your NRO account, all in terms of Rs 500 and Rs 100 then you can get a notice to disclose the source of funds or file income tax returns in India.


7. NRIs can only deposit old Rs 500 and Rs 1000 notes in NRO account
As I told earlier, you cannot deposit old Rs 500 and Rs 1000 notes into your NRE account because of it doesn't accept Indian currency. You can only fund NRE account using remittance or foreign currency cheque. This means you can only deposit your old Rs 500 notes into NRO account which is taxable.


That's all about some important points every NRI should know and remember about exchanging or converting old Rs 500 and Rs 1000 notes. The most important thing is that currently it's not possible to exchange or convert those cash outside India, it can only be done in India either personally going India or authorizing someone in writing.

26 comments:

  1. I have 10,000 INR. None of my friends are visiting india until march, Ridiculous. Ashamed no options to deposit for hard-earned money going to waste bin.

    ReplyDelete
    Replies
    1. totally agree, all the options are not convenient. I expected Government to at least allow overseas branches of Indian banks or High commission or Embassy to facilitate something for NRIs, but no update as such.

      Delete
    2. Another ridiculous.. RBI doesn't know howto Manage! Today they announced you cant deposit more than 5000 in account. our banking systems and countyr is under influence of in experienced politicians and officers.

      Delete
    3. Correction. The notification says that you cannot deposit more than Rs.5000 only once. That means you should deposit all cash in hand in demonetized currency notes in one go. There is no upper limit. Of course, if you deposit huge amount, questions will be asked, either now or later.

      Delete
  2. The PM should have formulated a clear policy for NRIs, a majority of whom wont be going to India for yet another year; poor policy-crafting by the government.

    ReplyDelete
  3. The PM should have formulated a friendly policy for the NRIs, allowing them 8 to 10 months of time since a majority of them won't be traveling to India yet for another year; they (Govt) need to set it right.

    ReplyDelete
    Replies
    1. Hello @Jagjiwan, Agree, PM has neglected NRIs this time. Going India to convert your cash is not practical and the worst option you would give to someone. Then there is a law that you cannot take more than 25K INR cash to India.

      I still hope that PM Modi will realize the situation and will give NRIs better option to convert/exchange their cash overseas. Let's see

      Delete
  4. 30th December 2010 should be 2016 in point 1.

    ReplyDelete
    Replies
    1. Indeed, thanks for pointing that Anirban

      Delete
  5. It seems like , no-one gives a sxxt about NRIs. I have had talk with many officers in PMO and RBI but no-one is clear on this. n what's the guarntee that a friend of your's can take back your's and his money to India easily, when custom department is there to make your day for nothing. Why PMO is not giving required attention and instructions to concerned.

    ReplyDelete
    Replies
    1. @Kamal, that's exactly the risk NRI runs if they take more than 25K INR in cash, and 25K INR is quite less if you are carrying cash from your friends and colleagues. Unfortunately, even after more than 1 month, no clear or practical solution for NRIs on demonetization.

      Delete
  6. I have about Rs 8500 of Rs500 notes in UK and about Rs7000 of Rs500 notes in India in my almirah and the keys are with us in UK. I have no plans to visit India before March next year. It appears we won't be able to make use of it when we visit India next time. It will be shame that all that money will go in the waste bin. I am admirer of Modi and this big risk he has taken to help the country and new generation. But there is hell a lot of cash overseas Indian are holding and it may run into many billion of rupees and I hope the government will do something to extend the period for overseas Indian/OCI holders for another6/9 months. Even if it does not then there will be no choice but to lose all that but this will not stop me praising Modi and its policies.

    ReplyDelete
    Replies
    1. @unknown, this is the situation with many NRIs. I am hearing, whatever cash that doesn't come into banks are considered black and Government will write them off their debt. This is bad, there is no option for NRI to deposit money at Overseas and it's not practical to travel India for mere 15K and 20K INR.

      Delete
  7. I have about RS 20000 in my shelf and keys were with me in us..recently one of our friend visited India and send those keys with him.can my parent exchange this 20000 rupees in RBI with all documents?

    ReplyDelete
    Replies
    1. Hello @Aiswarya, they cannot exchange on your behalf and given deadline for resident Indian is already over 31st December, they cannot exchange as their money even if you gift them.

      Delete
  8. Is the 31st march date good for Indian citizens living abroad or is it good for Indians who are citizens of other countries.

    ReplyDelete
    Replies
    1. The date is extended until 30th June 2017 but only for Indians i.e. people who have Indian passport returning from abroad. They can go to any RBI branches and deposit, there are a lot of conditions though, which you can see here

      Delete
  9. Dear,I got declaration from custom officer about SBNotes which I have got from Dubai, are these could be deposited into NRO Account directly or have to routed through RBI specific branches like Mumbai,Chennai,Nagpur and Delhi.

    ReplyDelete
    Replies
    1. Hello Syed, yes you have to go to RBI branches for depositing those to your NRO account.

      Delete
  10. Custom officer at Delhi airport did not write up for my husband (both of US are NRI 30+ years -US passport) during his recent visit to India on Jan 20th. He was told that it is only for Indian passport holders, who can deposit money at selected RBI branches. So seems like still problem for NRIs. Someone like us who have been out of India for 30+ years but still travel to India more than once or twice a year. I visited India for 6 days last month and may be going back in early May for a week. It is so difficult to figure out where to deposit money as only selected branches are on list. I am bit disappointed as many times he stops over in India for weekends and have not way to deposit money. Any suggestions?

    ReplyDelete
    Replies
    1. Hello @NRI, yes, the extension is only for Indians returning from abroad, since you have got US passport I am assuming you are US citizen with OCI card for India. Unfortunately, you can no longer deposit those Rs 500 and Rs 1000 notes to RBI branches anymore. The deadline finished on 31st December. I know, it's frustrating but ....

      Delete
  11. I'm an NRI and I have Indian currency of Rs.18K in 500 and 1000 denominations. I have declared the amount at customs in airport but I do not reside in either of the places where I need to deposit the amount in RBI. Can I authorize someone else on my be-half to get the currency exchanged at RBI.

    ReplyDelete
    Replies
    1. Hello @Anonymous, Sorry, you cannot do that, you have to be personally present to exchange the money or deposit in NRO account. I know this is pain because RBI offices are not everywhere and you may have to spend some money in travelling and accommodation, so choice is yours.

      Delete
  12. Is there any way out exchanging old notes for NRI returning back on July 10, 2017? Has there been any extension to the June 30,2017 date?

    ReplyDelete
    Replies
    1. Sorry @Anonymous, 30th June is I guest the last day you can return old notes.

      Delete