More relief: Rs 500, Rs 1000 notes can be used for paying utility bills, tax

Old Rs 500, 1000 notes to be accepted for payment of fees, charges, taxes, penalty to central and state governments, including municipalities and local bodies.

Old banknotes of Rs 500 and RS 1,000 denomination can be used to pay utility bills and taxes till Friday midnight, the government has said, giving more relief to millions of panic-stricken people trying to exchange the now-defunct currency.

A man gives discontinued currency notes to exchange them with newly introduced currency notes a bank in New Delhi on Thursday.(AP Photo)

The government also said new Rs 1,000 banknotes will be issued soon, assuaging the country grappling with the demonetisation of the two denominations that formed 86% of the currency till the shock decision on Tuesday.

“Old 500, 1,000 notes to be accepted for payment of fees, charges, taxes, penalty to central and state governments, including municipalities and local bodies (sic),” economic affairs secretary Shaktikanta Das tweeted. “Such old notes to be accepted for payment of utility charges like water and electricity.”

The government had earlier allowed use of such banknotes for payment of certain services such as rail and metro ticket, railway catering, airline ticket, LPG cylinder and medicines with doctor’s prescription.

Das told HT the government will also introduce new Rs 50 and Rs 100 banknotes but ruled out demonetising the existing notes in circulation. “We will introduce the new currency notes of Rs 1,000 at a later date depending on the market conditions and demand…the focus right now is to normalise the situation at the earliest,” Das said.

Earlier in the day, finance minister Arun Jaitley said the sucking out of Rs 500 and Rs 1,000 currency notes could impact short-term consumption but will eventually benefit the country.

“There will be some constraint on small purchases for a few days, till there is adequacy of currency, but this would be beneficial in long run,” the finance minister said at the inaugural session of the Economic Editors’ Conference. Jaitley assured that the small depositors will not be subject to any harassment and kept outside any scrutiny.

“It is only those with large amounts of undisclosed money who will have to face the consequences under existing laws,” he said. Jaitley said that temples and trusts, which receive hoards of cash, will also be subject to scrutiny.

Chief economic adviser Arvind Subramanian said the demonetisation of the high-value banknotes will not lead to any reduction in wealth.