8 Facts about Cash Deposits of Rs 2.5 Lakhs – Tax and Penalty
With Modi’s surgical strike on Black money, black money holders are finding various ways on how to convert such black money to white. Many are depositing cash in the bank on their family member and relatives' names. However, IT authorities have issued some guidelines that Cash Deposits above Rs 2.5 Lakhs may attract tax and penalty if the accounts are not proper. What are some of the facts about cash deposits above Rs 2.5 Lakhs which income tax authorities are talking about? What would be tax and penalty applies if the depositor is not able to prove and account such income?
10 Facts about Cash Deposits above Rs 2.5 Lakhs – Tax and Penalty
There are a lot of misconceptions being created now, that even small money lying at home or transactions done by small traders would come under IT scanner if they deposit cash in bank. Here are some of the facts about Cash Deposits done in the form of old notes and how one may face tax and penalty.
1) Cash deposited upto Rs 2.5 Lakhs in a bank account per person from 10th November, 2016 to 31st December, 2016 would not attract any IT queries.
2) Cash deposited above Rs 2.5 Lakhs in a bank account per person from 10th November, 2016 to 31st December, 2016 may attract IT queries.
3) IT authorities clarified that these guidelines apply for all cash deposits made during this 50 day window period.
4) Cash deposited in various banks under single person's name through a PAN number would be tracked to ascertain this limit of Rs 2.5 Lakhs cash deposit.
5) IT authorities would check cash deposits and income declared in IT Returns. In case there is any mismatch in income, IT authorities would further scrutinize and raise tax liability to income tax assesses. There are various ways where one can reduce and save income tax.
6) Any income mismatch is treated as income tax evasion.
7) Such tax evasion, one need to pay income tax based on income tax slab + 200% as penalty. E.g. if such person is in the 30 % tax bracket, he need to pay 90% as penalty (30% tax + 200% of 30% tax). If such person is in the 20 % tax bracket, he need to pay 60% as penalty (20% tax + 200% of 20% tax).
8) However, small traders, housewives, etc., who keep money for day to day expenses at home or in business, need not worry as such amount in the form of old notes of Rs 500 or Rs 1,000 may not exceed this Rs 2.5 Lakhs.
Conclusion: There is some panic created by some of the black money holders / politicians blaming on abolishing Rs 500 and Rs 1,000 currency notes. Citizens who are regularly paying income tax and individuals who are not eligible to pay income tax (earning less than Rs 2.5 Lakhs) need not worry about such statements and can make cash deposits upto Rs 2.5 Lakhs. Even if you are small trader and have cash above Rs 2.5 Lakhs, you can make cash deposit and pay necessary tax this year. However, such cash should be pertaining to this financial year.
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Facts about Cash Deposits above Rs 2.5 Lakhs – Tax and Penalty