Big note deposits over `2.5L value will be under income tax scanner Those with only 500s and 1000s fleeced in city
THE HARD BIT Tax plus 200% penalty for income mismatch
NEW DELHI: Cash deposits above `2.5 lakh could attract tax besides a 200% penalty in case of income mismatch, the government said on Wednesday, unveiling more measures to combat the “disease” of corruption and drain out illicit cash from the economy.
The announcement came a day after Prime Minister Narendra Modi created a flutter by abolishing 1000-and 500-rupee banknotes in a move to flush out money hidden from the tax man. New 500and 2000-rupee bills will replace about 86% of all currency in circulation by value.
Finance minister Arun Jaitley said on Wednesday people can deposit as much cash as they want in banks to get new notes but added the money will be open to tax scrutiny.
Hours later, revenue secretary Hasmukh Adhia spelt out how the government proposed to go about the business. “We would be getting reports of all cash deposited during the period of November 10 to December 30 above a threshold of `2.5 lacs in every account. The department would do matching of this with income returns filled by the depositors. And suitable action may follow,” he told reporters.
Amounts that don’t match income sources will attract 30% tax and a penalty of 200% on the taxable amount, he told HT, adding that prosecution will be decided on a case to case basis.
Successive governments have struggled with under-reporting of taxes, seen as a major hurdle in expanding state revenues, as well as with growing undisclosed incomes to avoid taxation.
Jaitley said the ban on highvalue banknotes will change this.
“The credibility of the Indian economy will increase,” he told journalists, adding the move will boost tax revenue in a country where just 3% of the population pays tax.
Modi’s move led to immediate upheaval, with millions of people holding cash savings hurled into uncertainty and fear, especially the poor who do not have bank accounts and keep their money in cash. CONT’D ON PAGE 6 ARUN JAITLEY, finance minister NEW DELHI: Unscrupulous shopkeepers, vendors and autowallahs made hay in the national capital on Wednesday out of the abolition of high-value notes — charging `500 for a bar of soap worth `50, or for an autorickshaw ride of a much lesser amount.
That happened when people couldn’t pay in `100 notes or bills of lower denomination.
As tens of thousands of people are saddled with `500 and `1,000 notes, which are no longer valid, buying essentials became a problem.
“The shopkeeper knew I only had 500- and 1,000-rupee notes. He said it was useless. Then, he offered goods worth `250. I had little option. I needed to get rid of the `500 note. He said he was helping me,” said Shikha Srivastava, a student of Maitreyi College.
In markets across the city, fly-bynight money exchangers sprang up on the streets, offering 60% of the value of the defunct `500 and `1,000 notes. That means, a `1,000 note fetched six `100 bills.
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There is some inconvenience for a couple of days or couple of weeks but those inconvenience cannot be alibi that India continues to live (with black money) P8