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The government has made the holding of more than 10 junked Rs 500/1000 notes a penal offence punishable with a minimum Rs 10,000 fine, but the harsher four-year jail term has been dropped.
The Specified Bank Notes Cessation of Liabilities Ordinance, approved yesterday by the Cabinet headed by Prime Minister Narendra Modi, allows individuals to hold no more than 10 notes of the old currency. It allows 25 such currencies to be held by research scholars.
Top sources said the ordinance, which will be sent to the President for his assent shortly, will come into effect from December 31.
It provides for making the holding of old Rs 1,000 and Rs 500 notes after March 31 a criminal offence that will attract a fine of Rs 10,000 or five times the cash held, whichever is higher.
Furnishing wrong information while depositing the old currency between January 1 and March 31 — a window provided only for exigencies — will attract a fine of Rs 5,000 or five times the amount, whichever is higher.
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The ordinance also provides for amending the Reserve Bank of India (RBI) Act to provide legislative support for extinguishing the demonetised banknotes that are not returned.
The 50-day window for depositing the old notes in bank accounts and post offices expires tomorrow.
While the high-denomination currency ceased to be a legal tender from midnight of November 8, 2016, a mere notification was not thought to be enough to end the central bank's liability and avoid future litigations.
Currency notes carry RBI's promise to pay the bearer the amount of the value of the note, a pledge that can be nullified only by legislation after giving the due opportunity to everyone to return old notes.
Sources said the proposal for a four-year jail term for anyone possessing a large number of demonetised currency after March 31, 2017, was not approved.
The ordinance, which will have to be converted into proper legislation by passing a law in Parliament within six months, makes possession, transfer or receiving an amount of over Rs 10,000 in the now-demonetised Rs 500 and Rs 1,000 notes a punishable offence.
Sources said while the deadline for the deposit of old currency in bank or post office accounts expires on Friday, time till March 31 is available for doing so at select RBI counters with stiff conditions. This facility is for people who were abroad, armed forces personnel posted in remote areas or others who can give valid reasons for not being able to deposit the cancelled notes at banks till December 30.
While announcing the demonetisation of the old currency on November 8, the government had allowed holders to either exchange them or deposit in bank and post office accounts.
In 1978, a similar Ordinance was issued to end the government's liability after Rs 1,000, Rs 5,000 and Rs 10,000 notes were demonetised by the Morarji Desai-led government.
Sources said the legal amendments are needed every time the government decides to scrap any legal tender to put an end to its promissory note.
Of the Rs 15.4 lakh crore worth of currency that was scrapped, about Rs 14 lakh crore has been deposited in banks or exchanged.
