Government to impose penalty on cash deposits with income mismatch; cash deposits above Rs 2.5 lakh under scanner

Further dangling the stick, government on Wednesday warned that cash deposits above Rs 2.5 lakh threshold under the 50-day window could attract tax plus a 200 per cent penalty in case of income mismatch.

"We would be getting reports of all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account.

"The (tax) department would do matching of this with income returns filed by the depositors. And suitable action may follow," Revenue Secretary Hashmukh Adhia said on Wednesday.

Any mismatch with income declared by the account holder will be treated as a case of tax evasion.

"This would be treated as a case of tax evasion and the tax amount plus a penalty of 200 per cent of the tax payable would be levied as per the Section 270(A) of the Income Tax Act," he said.

The government has allowed citizens to deposit in their bank accounts old currency of Rs 500 and Rs 1,000 denominations, which had been declared invalid in the nation's biggest crackdown on blackmoney, corruption and counterfeit notes, between November 10 and December 30.

Here are important points to keep in mind

# Any irregularities between the deposited sum and income declared would attract up to 30 per cent income tax and 200 per cent of tax liability as penalty.

# Jewellers also need to produce Permanent Account Number (PAN) details of buyers. By failing to do it, they will face action.

# People need to furnish PAN for deposits above Rs 50,000. The PAN details will go to the tax department.

# Banks to remain open on Saturday and Sunday.

# Rail, metro stations and toll gates to accept old 500, 1000 currency notes.

# ATMs to be constantly refilled. Financial Services Secretary Anjuly Chib Duggal said banks had been asked to open more counters and keep refilling ATMs. She said her department was in touch with RBI and was monitoring cash availability.

# The old 500 and 1,000 currency notes will be deposited only after producing ID proof.

# There is no limit to deposit amount. But, there is a cap of Rs 4,000 on exchange of old notes. Withdrawal limit is set at Rs 10,000 per day and Rs 20,000 a week.

# Income tax authorities are tracking everything. Central Board of Direct Taxes will be tracking the exchange of old currency notes.

(With PTI inputs)