Indian State’s Income Tax Department Investigates Potential Illicit Scheme Involving ₹2000 Note Exchange

The Income Tax Department in Bhubaneswar is preparing to investigate a suspected illicit scheme involving the exchange of discontinued ₹2,000 notes at a Reserve Bank of India (RBI) office. Reports indicate that individuals working on commission have been seen queuing for two consecutive days at the RBI office, each exchanging these notes for a commission of approximately ₹300. Each person is observed transacting up to ₹20,000, which raises suspicions of tax evasion by those facilitating this operation. The department foresees difficulties in identifying individuals still holding large amounts of ₹2,000 notes, especially as they appear to be exploiting impoverished residents from slum areas for these illegal exchanges. An inquiry by the Economic Offense Wing (EOW) of the Crime Branch also points to potential tax evasion; however, EOW’s actions remain constrained until evidence of wrongdoing is found.

This week, following RBI’s announcement to phase out ₹2,000 notes by October 7, large crowds have been gathering at the RBI office in Bhubaneswar for currency exchange. Daily exchanges involve approximately 700 individuals, amounting to around ₹1 to ₹1.5 crore. Despite this, around ₹12,000 crore worth of these notes continues to circulate, as disclosed by Governor Shaktikanta Das during a Monetary Policy review meeting. Investigations by the Economic Offense Wing and the Enforcement Directorate were prompted by reports of daily wage laborers receiving commissions for these exchanges.

The ₹2,000 note, equivalent to about $24, was introduced in November 2016 to fulfill currency demand following the withdrawal of ₹500 and ₹1,000 notes. It was discontinued in 2018-19 when other denominations became sufficiently available, according to Sarada Prasana Mohanty, Regional Director of RBI.