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.
Also Read: Should you wake up your idle money in your SB account?
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.
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
Facts about Cash Deposits above Rs 2.5 Lakhs – Tax and Penalty
- 11 Genuine Ways to Make Money in Free Time (Online + Offline) - June 5, 2023
- 17 Best Debt Mutual Funds to invest in 2023 (as per ChatGPT) - June 3, 2023
- Indel Money NCD Bonds June 2023 – Doubling Investment in 6 Years - June 2, 2023
I am retired person. I am getting 30 thousand pension monthly since March 2011 i.e. 3,60,000 yearly. The retirement benefit as GPF, gratuity etc. 32 lakhs. I invested this money in senior saving scheme of Post office (15 lakhs ). Rs. 17 lakhs invested in Fix deposited in Banks. I getting regular interest on FD about 4.5 lakhs. This quarterly interest deposited in Saving Banks accounts. I am regular income-tax payer and I pay Income tax on my pension and on all FDs last 5 years. During this period I withdrawn some money and keep it is household saving at home. This household saving is 8 lakhs and 23 thousands of 500/1000 notes. After demonetisation on Nov.8, 2016 I deposited this money in my saving bank accounts. May I have to be paid 50% Income-tax of Govt. declaration scheme of Govt. after demagnetisation? kindly, guide me.
The info. is really crisp and simple to follow.
KIndly throw some light on impact on CURRENT ACCOUNT deposits of OLD CURRENCY.
It is immaterial. They would continue the way they are.
Nicely explained. However can the govt. be believed? Any rule can be changed anytime.
Thanks for the wonderful article. I’m a tax payer for the last 10 years and I’m currently in 30% tax slab for the last 2 years. I’ve around 10 Lakhs of old notes as cash at me which was withdrawn in parts in the last few years. Do I have to pay tax again for this amount if I deposit this?
Hi Bharat, As long as you can prove that you paid tax, you need not worry. go ahead and deposit the amount in your bank account.