Assuring people that taxman will not hound those making small deposits in scrapped Rs 500/1,000 currency, Finance Minister Arun Jaitley on Thursday advised them not to throng banks as there is enough time to exchange the junked notes.
He said however that those depositing large amounts of unaccounted money will have to face the consequences under tax laws, which provide for tax and a 200 per cent penalty.
“With regard to people making small deposits, nobody will face any question or harassment of any kind. People who have small amount of cash at home for exigencies and emergencies, they can deposit that in their account. And the revenue department is not going to take notice of small depositors,” Jaitley said.
He added that deposits within the tax exempted limit can always be made within the banking system without any questions being asked.
“It’s only people with large amounts of undisclosed monies who will have to face the consequences under the tax laws,” Jaitley said at the Economic Editors’ conference.
Revenue Secretary Hasmukh Adhia said that only cash deposits of over Rs 2.5 lakh in bank accounts will be scrutinised by the tax department and in case of mismatch with I-T returns, tax plus 200 per cent penalty would be levied.
The government has allowed citizens to deposit in their bank accounts old currency of Rs 500 and Rs 1,000, which has been declared invalid in the country’s biggest crackdown on black money, corruption and counterfeit notes, between November 10 and December 30.
On whether the demonetisation of Rs 500/1000 notes will help weed out black money, Jaitley said this is not an isolated initiative and the decision has to be seen in the backdrop of various steps being taken including GST roll out.
“You will have the currency squeeze that will take place because a lot of static currency is not going to come back into the market. You have the GST which will be implemented, which is a far more effective system where tax evasion will be much lower and compliance will be much higher. You have parallel movement to rationalise your direct tax rate,” he said.