As people with unaccounted cash seek alternate measures (and agents) to avoid paying tax on their money, the government has come up with a scheme to encourage them to deposit and declare it.
The government is planning a tax law change so that it will tax 50 percent of unaccounted cash deposits made by December 30.
The government is reportedly planning this change in the tax law to get people to declare their unaccounted wealth.
Here are the details:
- A minimum of 50 per cent tax may be levied on unaccounted cash deposited in banks made using the banned currency notes up to December 30 along. This penalty is almost the same as what some agents are charging people to launder their unaccounted cash.
- In addition, people who make such deposits will have to keep the untaxed money in accounts for a minimum of 4-years.
- The government, they further said, is also contemplating coming out with a bond in which the 25 per cent ‘lock-in’ money would be parked and can be withdrawn after 4-years by the depositor.
- If you don’t declare the funds in tax returns, a higher 90 per cent tax and penalty will be imposed.
- 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.
- After the demonetisation announcement, there has been a surge in bank deposits, particularly in zero-balance Jan Dhan accounts. The deposits in these accounts has risen by over Rs 21,000 crore in just two weeks, raising suspicions that these accounts may have been used to launder black money.
- Initially tax authorities had spoken of the highest tax rate and a 200 per cent penalty for any unexplained deposit above Rs 2.5 lakh between November 10 to December 30 period, but they felt that may not be legally sound.
- The government plans to bring the amendment for approval during the ongoing winter session of Parliament.
- The government is likely to introduce the amendments to the Income Tax Act in Parliament on Monday or Tuesday after seeking President’s nod.
- Out of the additional taxes on unexplained and undisclosed deposits, the government could create a fund to build rural infrastructure.