Demonetization has rocked the whole lot of people . Each one form lower to upper class is affected. In one word we can say India gets “Modi-fied”.
Most of the financial and tax consultants have been flooded with the ultimate question how much to deposit ? What to do with the 1000,500 notes ? Should we continue accepting the notes for unaccounted sales ? What will happen to my life time saving ? etc..
I give herein below some tips category wise which can be followed to avoid complications in future :
Income Tax Assesses maintaining books of accounts : They should prepare their balance sheet as on 8th November ,2016 and ascertain their cash balance. Old currency out of this available balance can be deposited in bank without any problem. Preferably it should be deposited in single shot subject to security issue.
Income Tax Assesses not maintaining books of accounts : If possible They should prepare their books of accounts of at least 8-10 years . Otherwise total their returned income of last 8-10 years and deduct there from any investment made , major expenditure , any asset purchased and annual household expenditure. This will give them a rough idea of their cash balance. Old currency out of this balance can be deposited in bank . Keep this working handy in case of any enquiry. Salaried persons generally fall in this category .
Neither Income Tax Assesses nor maintaining accounts : First time they are under stress. They cannot show their income more than the taxable limit of specific years. They can estimate their income less than taxable limit only and deduct there from the household expenditure, assets purchased, Investment made. The balance remaining can be deposited in bank . But will have to be justified with facts and figures.Daily wage earners, hawkers , lower rung employees can deposit cash below 2 lacs without any issue.
Housewives: This is most affected lot . Till now keep aside Taxmen even their family members were unaware of their cash holdings. They are shocked to the core. If their cash holding is justifiable as per their income tax returns , or drawings of their better halves it can be deposited in bank without any fear.
Agriculturists : The tax free lot . But they too should calculate their agriculture income of last 8-10 years and after deducting the expenditure deposit the old currency in bank. Income estimated should be justifiable by the land they are holding and crop they are cultivating.
General Suggestion : Anyone doing any adventurous planning should keep in mind the Indirect Tax Aspect also. Do not get panicked and loss your hard earned earnings. Utilise the time allotted to plan properly with the help from their financial consultants.
The decision to demonetization has been welcomed by one and all. It will also help in implementing the biggest indirect tax reform GST. But people expected a smoother efficient transition. Infrastructure should have been better placed. To start with only 1000 note should have been banned. Also there is no justifiable argument for introduction of Rs. 2000 note. First , now people have lost faith in the high denomination currency , secondly it will further generate the black money. Also who guarantees that Rs.2000 note can not be faked.
We hope the Indians come out of this crisis as early as possible and get back to their work.
Kyonki aur bhi gum hai Jamane Me !!!!!
(Author is a Practicing Chartered Accountant and can be reached at firstname.lastname@example.org)