Unaccounted Deposits In Old Notes To Attract 50 Per Cent Tax, 4-Year Lock-In Period
In a change of plans from what was announced on November 8 demonetisation, government has now decided a minimum of 50 per cent tax for the unexplained bank deposits made using banned currency notes with a 4-year lock in period for half of the remaining amount. If it is not declared voluntarily, it will attract higher tax and penalty at 90 per cent.
In an amendment to the Income Tax Act last night, the cabinet has approved that cash deposits made using the scrapped 500 and 1,000 rupee notes above a threshold that are declared to Income Tax authorities may attract 50 per cent tax.
Half of remaining deposits, or 25 per cent of the original deposit, will not be allowed to be withdrawn for four years, top sources told NDTV. In case such deposits are not declared and are detected by tax authorities, a total of 90 per cent tax and penalty would be charged, they said.
After the sudden demonetisation of Rs 500 and Rs 1000 notes, government had given 50 days window from November 10 to deposit these tender or exchange them for new tender with a limit on exchange to a maximum of Rs 2000 per person.
Due to this, there had been sudden surge in bank deposits particularly in zero-balance Jan Dhan accounts that swelled by over Rs. 21,000 crore in just two weeks, raising suspicion that these accounts may have been used to launder black money, they said.
Earlier, the tax authorities had talked of levying a peak rate of tax and 200 per cent penalty on top of it for any unexplained deposit above Rs. 2.5 lakh during November 10 to December 30 period, it was felt that such a move may not have legal backing.
The government plans to bring the amendment for approval during the ongoing winter session of Parliament. The government believes that mere purpose of demonetisation would fail if the ill-gotten wealth made way into the system through benami deposits.
The tax rate however cannot be the same as charged to honest tax payers. It also could not be the 45 per cent tax and penalty charged on hereto undisclosed wealth brought to books using a one-time compliance window under the Income Disclosure Scheme (IDS) that ended on September 30.