Deposits must match cashflow
A DEPOSIT OF `2.5 LAKH MADE BY YOU WILL DEPEND ON FACTORS SUCH AS THE NUMBER OF YEARS OF SERVICE, ETC
QI am currently a tax payer in the 20 per cent bracket. I have about `2.5 lakh in cash with me which I would like to deposit. Will this `2.5 lakh be treated as income and taxed at 20 per cent? Or will I be levied a penalty of 200 per cent on the tax payable? If not, does this mean that `2.5 lakh amount is completely tax-free and penalty-free?
As per the clarification provided by revenue secretary Hashmukh Adhia, for those who maintain or is required to maintain books of accounts, the cash appearing in books of accounts as on November 8, 2016, can be deposited without any limit. Books should be updated up to November 8, 2016, and only cash available as per books can be deposited.
Any amount deposited in the bank should be corroborated with evidence through books or cash flows, where there are no books.
However if the source is unexplainable, then as per instructions it will be taxed at the rate of 30 per cent along with a penalty of 200 per cent — i.e. total tax liability could be 90 per cent of unexplained cash. The department may raise question on amount deposited exceeding `2.5 lakh during November 10, 2016 to December 30, 2016.
Further, another notification from the government vide no 14/2016, dated 15-11-2016, any deposits in one or multiple installments made during 09-11-2016 to 30-12-2016 of ` 2.5 lakh in one or more savings account or `12.5 lakh in current/loan account will be reported in AIR (Annual information Report).
A deposit of `2.5 lakh made by you will depend on factors such as the number of years of service and any amount left over after meeting your household expenditure and any investments or assets acquired out of income generated over the years.
The income tax department will start checking possible mismatches between the declared income and the amount deposited by individuals above `2.5 lakh between November 10, 2016 and December 30, 2016. The CBDT chairman has also stated that penalty of 200 per cent will be levied in such cases.
QMy father is an 84-year-old pensioner. He lives in Karnataka and files returns every year. Recently, the Karnataka government has taken a part of his ancestral property for widening a highway. This time, along with others, he has also been compensated. They assessed the value of the acquired land as `15 lakh (although the current value of land is much higher) and paid him `13.5 lakh after deducting `1.5 lakh as tax.
Does he need to pay any kind of tax against the compensation received on account of his ancestral property? Since it has already been deducted, can he claim tax concession under any section?
Your query is silent on the cost and date of acquisition of the property. The cost inflation index will be applied to the cost of acquisition of the property. The compensation received on compulsory acquisition minus the indexed cost of acquisition of the property shall be the long term capital gains (LTCG).
The LTCG are taxed at a flat rate of 20.6 per cent. However, as your father is a very senior citizen, he is liable to pay tax only on the income exceeding `5 lakh (including other incomes). He can set-off the LTCG against the unutilized threshold limit up to `5 lakh and pay the tax, if any on the balance.
The tax credit of `1.5 lakh deducted by the state government can be set-off against any tax liability arising on LTCG and the balance amount shall be payable/refundable, as the case may be.