Cash deposits above Rs 2.5 lakh could attract tax and penalty and authorities might take away 90% of your money if there is an income mismatch, according to a government decision on Wednesday.
The announcement came a day after Prime Minister Narendra Modi created a flutter by abolishing 1000 and 500 rupee banknotes in a move to flush out money hidden from the tax man. New 500 and 2000 rupee bills will replace about 86% of all currency in circulation by value.
Revenue secretary Hasmukh Adhia answers the four frequently asked questions:
A lot of small businessmen, housewives, artisans, workers may have some cash lying around as their savings at home. Will the income tax department ask questions if the same is deposited in banks?
Such group of people, as mentioned in the question, need not worry about such small amount of deposits up to Rs 1.5-2 lakh, since it would be below the taxable income. There will be no harassment by income tax department for such small deposits made.
Will the income tax department be getting reports of cash deposits made during this period? If so, will the current threshold of reporting requirement of reporting cash deposits of more than Rs 10 lakh will only continue?
We would be getting reports of all cash deposited during the period of November 10 to December 30 above a threshold of Rs 2.5 lakh in every account. The department would match this with income returns filled by the depositors. And suitable action may follow.
Suppose the department finds that huge amount of cash above Rs 10 lakh is deposited in a bank account, which is not matching with the income declared, what would be the tax and penalty to be paid on the same?
This would be treated as a case of tax evasion and the tax amount plus a penalty of 200% of the tax payable would be levied as per the section 270(A) of the income tax act.
It is believed that a lot of people are buying jewellery now. How does department plan to tackle this?
The person who buys jewellery has to give his PAN number. We are issuing instructions to the field authorities to check with all the jewellers to ensure that this requirement is not compromised. Action will be taken against those jewellers who fail to take PAN numbers from such buyers. When the cash deposits of the jewellers would be scrutinised against the sales made, whether they have taken the PAN number of the buyer or not will also be checked.