After banning the higher denomination currency, the government has issued a warning that records will be maintained by banks for those who deposit cash worth more than Rs 2.5 lakh between November 10 and December 30.
The tax department will match the amount deposited with the income shown in the return filed over the previous years. If there is a mismatch, suitable action will follow.
In case the amount deposited is more than Rs 10 lakh and the money is unaccounted for, then it will be treated as tax evasion. So, apart from the tax due, the person will have to pay a penalty of 200 per cent. Penalty is levied on the tax amount due.
So, suppose a person falls in the highest tax bracket of 30 per cent (with income not exceeding Rs1 crore) and has unaccounted money of Rs 10 lakh, then the penalty can be over Rs 9 lakh (30.9 per cent tax including 3% cess plus 200 per cent of 30.9 per cent). If the income is more than Rs1 crore there will be additional levy of 12 per cent as surcharge.
The total penalty can be much higher or, in fact, a person may have to pay more than the amount declared if interest is to be paid on the tax due. “The tax department will check if the income is from past years. Then interest at the rate of 12 per cent per annum will be levied for the period since the tax is due,” says Sudhir Kaushik, Chief Financial Officer, Taxspanner.com.
“The government had given the option for declaring undisclosed income under Income Declaration Scheme (IDS) where the effective tax rate was much less at 45 per cent. But that window has been closed now. So, if now a person has undisclosed income, he or she has to pay higher penalty or face persecution, ” adds Kaushik.
In case of IDS, the government had provided immunity against prosecution. But now, if the Principal Tax Officer feels that the tax evasion was done wilfully, it may lead to rigorous imprisonment ranging between six months and three years, depending on the amount and nature of the tax evasion.
However, it is not that if you deposit the money with the bank you will have to pay penalty. You may get a scrutiny notice from the tax department, which will ask you for the source of income. If you are able to explain the source or are able to prove that tax evasion was not done wilfully, the tax officer may waive the penalty depending on the circumstances.
Therefore, it is advisable that you don’t panic and go to a tax expert and seek their help on the necessary action to be taken.
Original Article: http://bit.ly/2fpSxY3
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