1) In terms of Gazette Notification No 2652 dated November 08, 2016 issued by Government of India, Rs 500 and 1000 denominations of Bank Notes of the existing series issued by RBI shall cease to be legal tender with effect from 9th November, 2016,(refer Notification here: Withdrawal of Legal Tender Status for ₹ 500 and ₹ 1000 Notes
2) As per FAQ point no 2 issued by RBI, these Bank Notes CAN NOT be used for transacting business and/or store of value for future usage after 8th November 2016 . (Refer FAQ here: 26 FAQs on withdrawal of ₹ 500 & ₹ 1000 Banknotes
3) It is clear that the amount of CASH IN HAND in the form of Old 500 & 1000 notes as at 8th November 2016 closing will be identified as it will be lying with the assessee .
4) New series of Rs 500 & 1000 notes will be available wef 10th November 2016.
5) As per Accounting Principles the cash in hand as at 8th November will be readily available with the assessee.
6) As per FAQ , You can not accept illegal tender currency after 8th midnight for any transactions except specifically exempted by govt like Public Hospitals, Petrol Pumps etc.
7) Whatever you possess or hold in the midnight of 8th needs to be deposited in your bank account without any limit or get exchanged with limits specified. How the frequent deposition in the banks would be explained and justified ? and therefore is not advisable.
Hence the old notes as at 8th November 2016 should be deposited *IN SINGLE TRANSACTION* with the bank.
8) The time upto 30th December 2016 is given only for the purpose of ease. The same is not to do anything with Income Tax act as well as accounting principles and are independent.
9) CBDT already clarified that Tax Laws as at date will be applicable irrespective of the scheme.
Revenue Secretary Hasmukh Adhia tweeted yesterday that tax department will collect reports of all cash deposited between Nov. 10 & Dec. 30th, above Rs. 2.5 lacs;
Mr. Adhia adds ” :Income Tax department would do matching of this with income returns filled by the depositors. And suitable action may follow.” ; In case of cash deposits above Rs. 10 lacs not matching with tax returns, same to be treated as ” tax evasion” and tax plus 200% penalty u/s Sec. 270(A) of Income Tax Act to be levied;
FM Arun Jaitley yesterday in an interview told that To curb illegal practices upto 11th, the exemption was even not granted to pvt hospitals to accept old Notes. That shows how much alert govt is with the scheme.
Hence utmost care should be taken considering above to avoid un necessary issues in future. Keep track and evidence of necessary documents and events.