Apart from tracking cash deposits exceeding Rs 2.5 lakh made in banks during the 50-day window for old Rs 500 and Rs 1,000 notes, the Finance Ministry is also compiling data on the surge in deposits in hitherto zero- balance Jan Dhan accounts which will also face a 200% penalty if unexplained.
After withdrawing old 500 and 1000 rupee notes, the government has allowed the banned notes to be deposited in bank accounts or exchanged for new currency notes till December 30.
This has led to a sudden spurt in cash balances in millions of Jan Dhan accounts, opened under the government's scheme for beneficiaries to get their entitlements like LPG subsidy.
Tax Department is collating data on spurt in Jan Dhan accounts. It will analyse all data and impose tax plus a 200 per cent penalty in cases of unexplained high value deposits, the official said.
Misreporting of income invites a penalty of 200% of the tax payable under the new Section 270(A) of the Income Tax Act.
Those depositing Rs 3-5 lakh will have to pay a penalty of Rs 50,000 in addition to the tax of Rs 25,000 that will be levied on the hitherto undeclared amount. The total tax plus penalty of Rs 75,000 that such persons will have to cough up will work out to an effective rate of 15 %
But those depositing larger sums of Rs 50 lakh to Rs 1 crore will end up paying a much bigger pentaly of Rs 27 lakh to Rs 56 lakh in addition to the tax which will take the effective rate of tax to the 81 % to 85% range.
"We would get the details of accounts in which more than Rs 2.5 lakh have been deposited. Any mismatch with income declared by the account holder will be treated as a case of tax evasion," Revenue Secretary Hasmukh Adhia said last week.
This would be treated as a case of tax evasion and 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, he had said.
Under Section 12 of the Prevention of Money Laundering Act, tax department can ask for any information from any agency including the Reserve Bank of India and cooperative banks besides all scheduled banks.
To prevent misuse of the 50-day window provided for exchange of genuine holdings of the scrapped 500 and 1000 rupee notes, the tax department may resort to imposing tax and penalty even before annual Income Tax Return (ITR) is filed, the official said. Any unexplained source of income can be charged with tax and a 200 per cent penalty on it. That can happen before filing of ITR. No retrospective amendment is required if high value deposits are caught before filing ITR, he said.
At the same time the Finance Ministry has carried out series of advertisements in newspapers assuring people that their hard earned money is safe and 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 has also stated that 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 has said. On farm income, the official said the tax department will match the acre of land the person has and the deposits made in the bank account.
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