Deposits above Rs 2.5 lakh to be taxed, mismatch with income to draw penalty

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In another late night announcement, the government warned that cash deposits above Rs 2.5 lakh during the 50-day window to return 1000- and 500-rupee notes could be taxed while a 200% penalty would be applied to deposits that don’t match declared incomes. “We will 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.

He further said any mismatch of income declared by the account holder and the deposits will be treated as a case of tax evasion.

“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.”

In a surprise televised announcement, Prime Minister Narendra Modi on Tuesday night said 1000- and 500-rupee notes were being scrapped as legal tender from November 8 midnight in a crackdown against black money. Saying there was no need for panic, Modi said people could deposit these notes in bank and post office accounts till December 30, 2016, and exchange them for other denominations or the new Rs 2000 and 500 notes being introduced on November 11.