Circular No. No.RB/CIR/IDS/1507

What it does

Tells the chief executives of member banks that old five hundred rupee notes may be accepted for payment of tax, surcharge and penalty under the Income Declaration Scheme, 2016, up to 15 December 2016. It rests on question 22(l) of the Reserve Bank of India's frequently asked questions on the withdrawal of legal tender character of the existing five hundred and one thousand rupee notes, which says banks can accept old five hundred rupee notes for payment of taxes and penalties, and it forwards an email from the Reserve Bank of India and the Central Board of Direct Taxes on the point. Banks are told to follow this strictly and to make sure their branches know the position.

Why it was issued

There was doubt at the branches about whether the demonetised notes could be taken in payment under the scheme, and the circular was issued to remove it.

Who it reaches

Member banks and their branches receiving scheme payments
Declarants under the Income Declaration Scheme, 2016 paying in old notes
Branch staff applying the demonetisation instructions

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

No.RB/CIR/IDS/1507
November 28, 2016
The Chief Executives of Member Banks
Dear Sir/Madam,
Accepting payment under IDS 2016
Kindly refer to the appended self-explanatory email from Reserve Bank of India and
Central Board of Direct Taxes on accepting payment under IDS 2016.
In this connection, we would like to invite your attention to the FAQ
(https://www.rbi.org.in/Scripts/FAQView.aspx?Id=119 ) on "Withdrawal of Legal
Tender Character of the existing Bank Notes in the denominations of ₹ 500/- and ₹
1000/-''
Question No. 22 (l) in the above FAQ clearly sets out that banks can accept old Rs.
500 denomination notes for payment of taxes and penalties. Thus, there should not
be any doubt that these notes can be accepted for payment of tax, surcharge
and penalties under the IDS, 2016, upto December 15, 2016.
Banks must adhere to the above instructions strictly and banks should ensure that
the branches are aware of the FAQs.
Yours faithfully,
K Unnikrishnan
Chief Executive (Offg)
World Trade Centre, 6th Floor, Centre 1 Bldg., World Trade Centre Complex, Cuffe Parade, Mumbai - 400 005. Phone: 22174040, Fax: 22184222
E-mail: webmaster@iba.org.in website : www.iba.org.in

What to watch

This is a banking association communication passing on the Reserve Bank and Board position, not a circular of the Board itself, so cite the underlying instruction rather than this letter.
The permission runs only to old five hundred rupee notes and only to 15 December 2016; that date has long passed.
The email from the Reserve Bank of India and the Board that it forwards is not part of the text before me, so the operative instruction has to be read from that email.

Where you meet it

Only historically, where a payment made under the Income Declaration Scheme, 2016 in demonetised notes in late 2016 is questioned.

← Circular No. 39/2016 · Circular No. RB/CIR/OTC-IDS/1404A →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.