- The President of India has approved the promulgation of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 today i.e. on 30th December, 2016.
- The Ordinance is a follow-up to the decision taken by the Government of India to cancel the legal tender character of the existing series of banknotes, as on November 8, 2016, in the denominations of Rs.500 and Rs.1000 (Specified Bank Notes-SBNs) in circulation.
The main objectives of the Ordinance are
(i) to provide clarity and finality to the liability of the Reserve Bank of India and the Government of India for the SBNs;
(ii) to provide an opportunity to those persons who were unable to deposit the SBNs within the time provided; and
(iii) to declare holding, transferring or receiving SBNs as illegal, with provisions for penalty for contravention of any of the provisions of the Ordinance.
This decision follows a number of steps taken to eliminate the menace of unaccounted money in the economy including setting up of a Special Investigation Team (SIT);
- enacting a law regarding undisclosed foreign income and assets;
- amending the Double Taxation Avoidance Agreements between India and Mauritius and India and Cyprus;
- reaching an understanding with Switzerland for getting information on Bank accounts held by Indians with HSBC;
- encouraging the use of non-cash and digital payments;
- amendments to the Benami Transactions Act; and
- implementation of the Income Declaration Scheme 2016.
It is a move in line with the government’s initiatives to curb unaccounted money in the system, money laundering and tax avoidance.