The government of India come up with the change to the income tax law to charge a fee on cash deposits from undisclosed income following the withdrawal of Rs 500 and Rs 1000 banknotes, a person familiar with the development said. As the government of India had after the Demonetization, given a 50 days i.e 10th of November to 30th of December for either of depositing the Rs of 500 and Rs of 1000 notes or exchanging them for new currency. Although, the exchange of money which was limited to maximum of rupees 2,000 per person and per day has been withdrawn, all the old notes has deposited in the bank accounts without any ceiling.
However, a higher tax and fine could be charge to the person if assesses do not declare the name of unaccounted cash spontaneously. If the cash deposits made using the scrapped 500 and 1000 rupees notes above a margin that are declared to income tax and may appeal to 50% of tax, as per the change to the Income Tax Act approved by the Cabinet Minister.
Also, If the deposits are not declare and the person is using other people account to regulate his black money then the tax ad penalty could be charge as high as 90% of the amount money. The second case is, if the provisions of the Benami Transaction (prohibition) Act, which has provisions for the jail term of as many as seven years of the time periods for the tax defaulter as well as the person who is helping to launder illegal wealth, may also apply.
The sources also said, those who had led to the flow in the bank deposits, particularly in zero balance Jan Dhan accounts that are increased by Rupees 21,000 crore in just two weeks, may have been used black money. And those account holders may also suffer.
For this purpose the tax authorities had talked and took a decision of levying a peak of rate of tax and 200% penalty on the top of it for unexplained deposits of money above then Rs 2.5 lakh during these 50 days of time period i.e 10th of November to 30th of December.
To cover those gaps, Cabinet Minister decided to take decision by approving the amendment of Income Tax Act by adding one article in one of the section to provide the tax on unexplained money. This change will provide certainty to the cash depositors said by Rahul Garg who is the leader of direct tax practice.