Deposits above Rs 2.5 lakh to be taxed, mismatch with income to draw penalty

The government warned that cash deposits above Rs 2.5 lakh during the 50-day window to return 1000- and 500-rupee notes could be taxed while a 200% penalty would be applied to deposits that don’t match declared incomes.

In another late night announcement, the government warned that cash deposits above Rs 2.5 lakh during the 50-day window to return 1000- and 500-rupee notes could be taxed while a 200% penalty would be applied to deposits that don’t match declared incomes.

A man displays 500 rupee notes following Prime Minister Narendra Modi’s announcement banning 500 and 1000 rupees notes as part of government’s fight against black money and corruption.(PTI)

“We will be getting reports of all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account. The (tax) department would do matching of this with income returns filed by the depositors. And suitable action may follow,” revenue secretary, Hashmukh Adhia, said.

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He further said any mismatch of income declared by the account holder and the deposits will be treated as a case of tax evasion.

“The tax amount plus a penalty of 200 per cent of the tax payable would be levied as per the Section 270(A) of the Income Tax Act.”

In a surprise televised announcement, Prime Minister Narendra Modi on Tuesday night said 1000- and 500-rupee notes were being scrapped as legal tender from November 8 midnight in a crackdown against black money. Saying there was no need for panic, Modi said people could deposit these notes in bank and post office accounts till December 30, 2016, and exchange them for other denominations or the new Rs 2000 and 500 notes being introduced on November 11.

Adhia said small businessmen, housewives, artisans and workers who had some cash lying as their savings at home need not be worried about any tax department scrutiny.

“Such group of people...need not worry about deposits up to Rs 1.5 or 2 lakh since it would be below the taxable income. There will be no harassment by the Income Tax Department for such small deposits made,” he said.

For people buying jewellery, he said the PAN number will need to be given.

“We are issuing instructions to the field authorities to check with all the jewellers to ensure 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 is scrutinised against the sales made, whether they have taken the PAN number of the buyer or not will also be checked,” Adhia added.