“The attempt will be not to harass honest citizens who are free to tender all of their legal, old high-denomination
currency savings in their bank accounts and get new ones,” he said. But the window provided to them will also be not allowed to be misused, he said, adding that the Income Tax Department is keeping a close eye on all high-value deposits.
Those depositing large amounts of unaccounted money will have to face the consequences under tax laws, which provide for a 30 per cent tax, 12 per cent interest and a 200 per cent penalty. Earlier in the day, the Finance Ministry came out with newspaper advertisements assuring people that their hard earned money is safe and that depositing junked Rs 500/1,000 notes of up to Rs 2.50 lakh in bank accounts will not be reported to the tax department.
It also cautioned people against depositing the money of unknown people in their own accounts or falling prey to
cheats, thugs and rumour mongers. Besides, the ministry said, farm income continues to remain tax free and can be easily deposited in bank. Small businessmen, housewives, artisans, workers can also deposit cash in their accounts without any apprehensions, it added.
“Deposits up to Rs 2.50 lakh will not be reported to the Income Tax department. There will be no harassment or
investigation. All honest citizen need not worry. Farmers’ income is tax free and can be easily deposited in bank,” the ministry said in newspaper ads. In its biggest crackdown ever on black money, the government on Tuesday night announced demonetisation of Rs 500 and Rs 1,000 notes and asked people holding such notes to deposit them in their bank accounts.
Consequences While Depositing Black Money and Income Tax Notices You Should Expect
After PM Narendra Modi banned the use of Rs 500 and Rs 1000 notes, the trending search in Google India was “How to Convert Black Money to White Money.” This is how the people of India use Google to know more solutions. They give importance to their money but doesn’t pay tax for the Country.
The money which is being deposited should be declared to the income tax. If the money is not informed and not legal then it will be a black money. They should be having sufficient proofs. If they are black money, then you should pay the tax for that. Demonetisation of the Rs 500 and Rs 1000 notes is a massive blow for those who have unaccounted money as they will face various penalties and prosecution proceedings under the Income Tax Act.
The rules put by Narendra Modi are very tight that the people who are depositing more than 2.5 Lakh will be charged the tax. The people who also deposits more than 2.5 lakhs will be notified to the Income Tax Department. Consequences which will be faced by a common man who deposit black money are as follows.
- You can expect a notice under section 142(1). If you don’t follow the rules which you have in the notice, then A.O will assess your income and impose tax and penalty as per his own judgement.
- Evaluation under section 153A which is the income tax raid.
- If your tax returns are being assessed other than the normal self assessment, then you might be penalized for depositing more money under section 144(a).
These are all the sections that you might face when you never filed a return deposits unaccounted money.
200% penalty on Cash Deposits over 2,50,000 is not 100% true
Does all deposits over Rs.2.50 Lakhs in the account is subject to scrutiny and penalty of 200% of tax?
The answer is NO. (Some people are spreading fear among the taxpayers)
Cash lying at home – Let’s accept the fact that most of the people may be keeping some amount of cash at home. Depositing such amount into bank account won’t attract tax or penalty.
Cash in proportion to Income – Say, your income is Rs.30 Lakhs per year and you have been paying taxes and filing return over many years. Now you are depositing, say Rs.15 Lakhs into your bank account. Does this subject to tax and penalty?
Mostly No. First of all, the cases for scrutiny will be picked up in the case of disproportionate cash deposits to the income earned. In the above scenario, it is quite unlikely to get a notice, even if you deposit over Rs.2.50 Lakhs.
If the case is picked up for scrutiny and the Assessing Officer (AO) is not convinced that the deposits are from the genuine source, then he may levy a tax on it.
The penalty of 200% u/s 270A – The burden of proving misreporting or suppression of facts will be on the Assessing Officer. He can’t just levy a penalty at his will. If he levies irrationally, it can be challenged in Appeals. So, the penalty is not automatic. One needn’t fear of it. If there is a reasonableness in your deposits, such cases won’t fit in 200% penalty.
VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.
Advise for contacting VidyaSunil & Associates;
E Mail ID : firstname.lastname@example.org
Cell No. : +91 9739834819