.png)
Article Details
| Demonetization of money & income tax |
 TAX TALK-14.11.2016-THE HITAVADA TAX TALK CA. NARESH JAKHOTIA Chartered Accountant Demonetization of money & income tax Query 1] I am a senior citizen retired from the Govt. job 4 years back. Whether the cash deposits by me and my wife in respective account would attract any penal consequences now? I have received many whatsapp that it would attract penalty @ 200%. Is it true? If deposited, will it be exempt up to Rs. 3 Lakh & taxable @ 10% from Rs. 2.50 lakh to 5 Lakh & 20% up to Rs. 10 Lakh? It is resulting in sleepless night as we have kept the currency of Rs. 500/ Rs. 1000 since last few years for emergency & for multiple individual reasons. Whether purchase of jeweler could be done to avoid any penal consequences? [Avinash Kolte, Nagpur & other readers with similar queries] Opinion: A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation- Ross Perot An historical decision to demonetize currency of Rs. 500 & Rs. 1,000 with effect from 09.11.2016 has resulted in lot of confusion, crisis & restlessness amongst many. It is further fuelled by varied type of rumors over social media. Amidst multiple posts, recurring circulation of 200% penalty is finding key place & creating fear in the mind of even honest taxpayer which is further augmented by finance ministry clarification that amount deposited in the bank account would be well subject to tax scrutiny. Admittedly, Government is proactive & following carrot & stick approach. Appreciation letter have been sent to the citizen for better compliance & stringent action is assured for the tax evaders. Everything appears to be moving in a planned & phased manner as it could be ascertained from Hon’ble PM earlier statement “Don’t blame me for any harsh steps” during recently concluded Income Disclosure Scheme (IDS). Cash deposit in the bank has been always on the radar of the income tax department since last many years. Whether small amount of cash deposits ranging from Rs. 50,000 to Rs. 1,50,000/- by normal people, house wives, senior citizen, from their savings would attract notices & harassment by income tax department is of paramount concerns for the citizens now. Revenue Secretary Dr. Hasmukh Adhia has immediately clarified that there will not be any harassment by Income Tax Department for such small deposits. It is aptly clear that the government has an eye on big and medium fishes & person depositing hefty cash above certain limit only would be questioned by the income tax department. Further, its only in case of disproportionate cash deposit in bank account vis a vis income declared by the the depositor that would results in further investigation. If the cash deposit is justifiable with regularly declared income & it is not out of unaccounted income, black money, unexplained sources etc, then there is no need to get panic in the present scenario. Such group of people who have earned or saved reasonable amount in the past need not worry about scrutiny and assessment as it would be a reasonable, logical & explained source of money only. Only in cases of tax evasion, under-reporting or misreporting of income, penalty of the tax payable in the range of 50% to 200% could be levied [Section 270(A) of the Income Tax Act-1961]. Few taxpayers have raised the question whether the amount deposited by individual/HUF in the bank without offering or explaining its source could be offered for taxation as their regular income & could pay the tax as per applicable income tax slab (i.e., 10%, 20% & 30%, as the case may be). Before doing anything, one needs to know about section 115BBE of the Income Tax Act-1961. Any amount/assets/investments/jewellery in possession of the taxpayer without known source of income or for which no satisfactory explanations exists, would be taxable flat @ 30% and not as per the regular income slab applicable to individual/HUF. Such income taxable under section 115BBE is not eligible for any deduction towards basic exemption limit, PPF/LIC investment & other losses cannot be set off against such income. Coming to the last part of the query, honest citizens with reasonable amount of cash even in the form of Rs. 500 or Rs. 1000 need not bother & may avoid investing in gold at present exorbitant price due to sudden panic of currency. There appears to be mass level confusions about the PAN quoting requirements. The topic was recently elaborated in Tax Talk Dated 12.09.2016. It can be retrieved from www.ehitavada.com]. Readers: Don’t get panic, confused, try to be honest, and deposit all your legitimate money without fear. Take care & don’t indulge in any malpractices by depositing someone else money. Depositing the money & paying tax according to the applicable prevailing income tax slab or @ 30% under section 115BBE is not the solution. It is not income tax department alone but other authorities & department as well who are keeping an eye on you & closely monitoring with the optimum use of available technology. It is undoubtedly the bold step and is in the National interest. [The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at SSRPN & Co 10, Laxmi Vyankatesh Apartment C.A. Road, Telephone Exch. Square Nagpur-440008 or email it at nareshjakhotia@ssrpn.com] |
 |