PAN Mandatory for Cash Deposits of Rs2000 Notes Exceeding Rs50,000
MAS Team | 24 May 2023
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The Reserve Bank of India (RBI) has recently withdrawn the Rs2000 notes from circulation, and individuals who possess these notes now have two options. They can either deposit them into their bank accounts or exchange them at a bank for notes of different denominations. However, in accordance with income tax regulations, it is mandatory to quote the Permanent Account Number (PAN) if the cash deposit exceeds Rs50,000 in a single transaction.
 
According to Rule 114B of the income tax regulations, if someone deposits more than Rs50,000 in cash in a single day, whether at a bank or post office, they must provide their PAN. However, if the deposited amount does not exceed Rs50,000 in a single day, quoting PAN is not mandatory.
 
The Rule 114B does not apply to the total amount of cash deposits made throughout the financial year; rather, it only applies to cash deposits made on a single day. The bank or post office should not request for their PAN or Aadhaar, for example, if someone deposits Rs20,000 in cash on one day and then deposits an additional Rs35,000 in cash a few days later.
 
To illustrate, let's consider an example. If you deposit Rs30,000 in Rs2000 banknotes in your bank account, and then Rs40,000 in Rs2000 banknotes in the same account 15 days later, the bank will not ask you to provide your PAN when you deposit the Rs2000 notes in cash. However, the bank would require you to mention your PAN if you made a single cash deposit totalling Rs70,000 in a single day.
 
Additionally, if cash deposits or withdrawals total more than Rs20 lakh in a fiscal year, the government has mandated the use of PAN or Aadhaar. The Central Board of Direct Taxes (CBDT) released this notification on May 10, 2022, and the new regulations went into effect on May 26 of that same year.
 
While individuals have the option to exchange Rs2000 notes, there is a limit imposed by the RBI. A maximum of 10 notes, or Rs 20,000, can be exchanged by one person at once, according to the RBI notification. The RBI governor stated in a media interaction on May 22, 2023, that banks will follow their own processes and rules for the exchange of Rs2000 notes.
 
The amount that can be deposited into a bank account, however, is not restricted. For deposits, Know Your Customer (KYC) guidelines will be in effect.
 
The deadline for depositing or exchanging Rs2000 notes is September 30, 2023. The decision to withdraw Rs2000 notes from circulation aligns with the RBI's clean money policy, while emphasizing that the Rs2000 note continues to be a legal tender.