❓Ask Duta: What are the Income Tax implications of new currency scheme👀❓

  |   India News

Rumours are circulating that deposits of above ₹2.5 lakhs under the new scheme will lead immediately to Income Tax raids❗ That is NOT the case. Don't believe in such rumours circulated online🙏

The Government has issued newspaper ads clarifying deposits upto ₹2.5 lakhs will not be tracked by IT Department. Deposits above that may lead to scrutiny by IT Department; already the IT Dept tracks high-value deposits (typically above ₹10 lakhs) so this need not come as much of a surprise😄

And, in case the IT department initiates a formal scrutiny of deposit under this scheme, only the existing provisions of the Income Tax will come into play to decide quantum and penalty of the assessment. Adequate measures are built into these provisions for the depositor to have shown the deposits in his IT return and an opportunity will also be given to him/her to explain the source of these deposits and to substantiate the legitimacy of the same.

So, in theory, only deposits made from unaccounted cash obtained illegitimately would suffer tax and penalty👏 There should be no need to worry for honest citizens that this scheme maybe used by IT Dept. to harass them❗

Some examples:

  • If a person has not shown cash of ₹1 crore in his/her IT return (earned by say "black money" dealing) and deposits it under the scheme, the IT dept may indeed initiate scrutiny and levy tax (at maximum marginal rate of 30% plus cess and surcharge) and penalty (of 200% on evaded tax amount) on the person.

  • If the person has shown the cash of ₹1 crore in his/her IT return (say earned by agricultural income, which is exempt from tax but considered in tax return for rate purposes) and deposits it under the scheme, the IT dept may still initiate scrutiny and if it is satisfied that there is no tax evasion (ie return filed has the income reported) and that the source of the amount is legitimate and the said ₹1cr income has been properly substantiated then there ought to be no penalty.

In short, the scenario under the scheme is no different from the relevant existing provisions of the Indian Income Tax Act when dealing with deposits of cash in bank accounts. Talk to a qualified CA or lawyer for specific advice❗