A minimum of 50 percent tax may be levied on unexplained bank deposits made using the banned currency notes up to December 30 along with a 4-year lock-in period for half of the remaining amount under the amendments to tax law the government plans to bring in Parliament shortly, PTI reports.
However, a higher 90 percent tax and penalty could be imposed if assessees do not declare the unaccounted cash voluntarily. Cash deposits made using the scrapped 500 and 1000 rupee notes above a threshold that are declared to Income Tax authorities may attract 50 per cent tax, as per the amendment to the Income Tax Act approved by the Cabinet last night.
Half of remaining deposits, or 25 percent of the original deposit, will not be allowed to be withdrawn for four years, reporst PTI. 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. The government had after the shock demonetisation, given a 50-day window beginning November 10 for either depositing the 500 and 1000 rupee notes in circulation or exchanging them for the new currency.
While the exchange, which was limited to a maximum of Rs 2,000 per person, has been withdrawn, all old notes without any ceiling can be deposited in bank accounts. As per PTI reports, this had led to a 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.
While the tax authorities had talked of levying a peak rate of tax and 200 percent 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.
To plug those loopholes, the Cabinet is believed to have yesterday approved amending the Income Tax Act by adding a clause in one of the sections to provide for the tax on an unexplained income during the window, reports PTI . The government plans to bring the amendment for approval during the ongoing winter session of Parliament.