Alarm to ring above Rs 2.5 lakh

Jayanta Roy Chowdhury, TT, New Delhi, Nov. 9: The Centre will be keeping a hawk eye on all cash deposits above Rs 2.5 lakh and could slap a penalty of 200 per cent on the income deposited after levying the tax if the amount is not reflected in the tax returns.

In a series of answers mailed to reporters today, revenue secretary Hasmukh Adhia said: "We would be getting reports of all cash deposited during the period of 10th November to 30th December 2016 above a threshold of Rs 2.5 lakh in every account. The department will match this with income returns filed by the depositors. And suitable action may follow."

If a huge amount of cash is deposited that does not match with the income declared, "this would be treated as the 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," Adhia said.

Section 270 A of the IT Act provides that in case of under-reporting of income flowing from deliberate misreporting, the penalty which may be imposed can be 200 per cent of the amount under-reported. However, if it is a case of under-reporting, but not due to wilful misreporting, the penalty can be capped at 50 per cent of the undeclared income.

Banks will reopen tomorrow after the the Modi government's shock announcement on Tuesday that Rs 500 and Rs 1,000 notes would no longer be legal tender.

Banks will allow customers to exchange notes up to a value of Rs 4,000 with the rest to be deposited in their existing bank accounts. Adhia's clarification could complicate matters for customers with large undeclared incomes stashed away in old notes.

However, Adhia made it clear that cash deposits of up to Rs 2.5 lakh would not be scrutinised and ordinary people who make such deposits would not be harassed. "People need not worry about such small amount of deposits up to Rs.1.5 or 2 lakh since it would be below the taxable income. There will be no harassment by the income tax department for such small deposits," the revenue secretary said.

However, bankers said that under RBI guidelines anyone making cash deposits of over Rs 50,000 would have to declare their PAN and they are required to inform tax authorities of cash deposits of Rs 2.5 lakh.

Adhia said the taxman would be scrutinising PAN details of jewellery buyers to check on possible black money diversions. "We are issuing instructions to the field authorities to check with all jewellers to ensure that this requirement is not compromised. Action will be taken against those jewellers who fail to take PAN numbers from such buyers," he said.

There have been reports that jewellers had kept shops open till well past midnight yesterday selling gold and silver coins and jewellery by accepting Rs 500 and Rs 1,000 notes in a bid to help clients turn black money into white. As a result, bullion prices shot up by Rs 4,000 per 10gm today.

Adhia in a separate tweet also said that while farmers should not worry about cash deposits as their income was exempt, their deposits should match known yields of their acreage. Analysts said this was probably done as it was common for people to divert black money to farms and show it as farm income.

However, in recent months, the tax sleuths have started to match exceptionally high farm incomes against possible yields per acre. Cases were found where a five-acre farm was being shown to have earned up to Rs 5 crore in profits.