CA Umesh Sharma

Arjuna (Fictional Character): Krishna, 26th January i.e. our Republic Day is coming closer. On this day, the unity and the strength of our country is represented through parade by our army, navy and by air force. There is parade exhibiting the cultures and specialties of various states. After demonetization, the government has released a notification on 17th January to take parade of the people depositing cash above Rs.10 Lakhs. What is that notification all about?

Krishna (Fictional Character): Arjuna, on this Republic day, there is an atmosphere of celebration and patriotism everywhere. On this day, on Rajpath various parades take place in a very grand way. People of other countries are also keen to watch the parade. It seems that this year there will be a special parade representing “Pradhan Mantri Garib Kalyan Yojna” and behind it there would be parade of people who deposited cash above Rs.10 Lakhs. This means there would be inspection of whether taxpayers have paid tax on the transactions effected by them. As the cash deposited in the banks post demonetization was far more than what government had expected. To regulate it, the government will send notices to people. The government has issued notification on 17th January 2017 to collect information for sending notices to people. The limit for this is being kept as Rs.10 Lakhs.

Parade of people depositing cash above Rs. 10 Lakhs

Arjuna: Krishna, what has the government stated in the notification?

Krishna: Arjuna, as per the section 285BA of Income Tax Act, 1961, specified person i.e. bank, company, people to whom tax audit is applicable, etc. have to give statement of their financial transactions. Under this, the nature and value of transaction is mentioned in rule 114E of income tax act. If a specified person is required to furnish any information mentioned in the rule, then such person will have to provide the details to income tax department in online Form 61A. Every taxpayer will have to submit such form by digitally signing it. The taxpayer will have to get registered by logging on to the website. After that, details will have to be given in Form 61A. The last date to file this form is 31st May for the financial year 2016-17. If the taxpayer does not file this form, then he will have to pay a penalty of Rs. 500 per day. If the form is filed late, then Rs. 100 penalty per day will be levied.

Arjuna: Krishna, which details will have to be provided by banks under this rule?

Krishna: Arjuna, every bank and post master will have to give the following details:

  1. Details of person purchasing bank draft or pay order in cash above Rs 10 lakhs in a financial year.
  2. If cash is deposited or withdrawn in or from a current account exceeding Rs.50 lakhs in a financial year, then details of such person will have to be given by bank.
  3. If cash is deposited above Rs.10 lakhs in a saving account in a financial year.
  4. If investment is made in fixed deposit of more than Rs.10 lakhs in a financial year.
  5. If payment is made above Rs.1 lakh in cash or Rs.10 lakh by any other mode for payment of credit card.
  6. If cash is deposited above Rs.12.5 lakh in current account or above Rs.2.5 lakhs in saving account from 9th November to 30th December 2016. Also, the details of cash deposited by such person from 1st April to 9th November 2016 will also have to be given. The last date to submit such details is 31st January 2017.

Arjuna: Krishna, which details are required to be provided by person other than banks?

Krishna: Arjuna,

  1. If a person to whom tax audit is applicable receives an amount exceeding Rs.2 lakhs in cash for rendering any service or sale of goods, then details of such person are required to be given.
  2. Details of a person purchasing shares of a company of above Rs.10 lakhs would be required to be provided by the company.
  3. Any person investing in bonds or debentures of a company for more than Rs.10 Lakhs.
  4. Every registrar and sub-registrar will have to provide details of a person selling or purchasing an immovable property for more than Rs.30 lakhs.
  5. Details of a person paying more than Rs.10 lakhs for acquiring units of one or more schemes of a Mutual Fund, then the details of such person will have to be provided by the mutual fund company.

Arjuna: Krishna, what will the government do after collecting such information?

Krishna: Arjuna, on the basis of such details, the government will send notices. Every person in receipt of such notice will have to answer them. If they are satisfied with the answer, then no further action would be taken. If the answer is not satisfactory, then the department may make such person to go in the “Pradhan Mantri Garib Kalyan Yojna”. Otherwise, tax will be collected along with huge penalty and interest. The government has provided clarifications on Pradhan Mantri Garib Kalyan Yojna in an FAQ released by it on 18th January 2017. A person participating in this scheme will have to pay tax at the rate of 49.9% and will have to deposit 25% of such declared value in bank account without interest.

Arjuna: Krishna, what should taxpayers learn from this?

Krishna: Arjuna, government wants to get hold of the people evading tax. If a person enters into a transaction above Rs.10 lakhs, then he will have to face the income tax notices. A person, who has deposited money which has been earned by evading tax, should participate in the scheme of the government and get relieved. Otherwise get ready to face the worst of the consequences. Every person should pay tax on the income earned and contribute towards the growth of the country. A very happy Republic Day to all.

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Tags : black money (695) CA Umesh Sharma (159) Demonetization (470)

15 responses to “Parade of people depositing cash above Rs. 10 Lakhs”

  1. GANDHI MOHAN BHARATI says:

    The answer to Shri.Bhim Sain Aggarwal is that you do not have to file Income Tax Return (ITR) just because you have a 10.00 Lakh Deposit, if your income is below 2.50 lakhs.

    But, I am afraid, you may, almost certainly,receive a notice from IT Department to show the source for the 10.00 lakh Deposit !!! Be prepared with answer,

    The mischief in Budget of 2016 is that anyone with income above 2.50 lakhs, whether they are taxable or not, have to file ITR. Even a Farmer whose entire income is fro agriculture, even though totally exempt from Tax, has to file an ITR, if his income is above 2.50 lakhs. Poor village Farmers !!!!

    With so many Farmers in villages getting notices from IT Department, may be BJP may not be a favoured party in future.

  2. VINOD KUMAR GUPTA says:

    very difficult for the people to understand not knowing provisions of income tax ,

  3. Balaji says:

    All Banks Accounts should be linked with CBDT . Then everything will be OK . 90 % of people don’t know IT rules and regulations. Because of Hindi and English. Ban all currencies and make every thing via Card . i e accountable under Govt Dept . Take what ever you want as Tax . Spent it for Govt employyes and Political Nethas as you like

  4. Bhim Sain Aggarwal says:

    Please intimate me whether renewal of fixed deposits above Rs. 10.00 lacs need to be reported to IT Deptt by the Bank. Is it necessary to file ITR for a person having fixed deposits above 10.00 lacs in Bank if his total income is less than 2.50 lacs.

  5. g.giridharan says:

    Suppose a person withdraw money from sb account through jewel loan previously i.e before nov 8 and deposited back those amount withdrawn which is beyond 2.5 lacs and the same can be corrbrated with with withdrawls? What could be the impact of this deposit

  6. satish dabholkar says:

    This is the correct advice given by TAXGURU of paying the required tax and use the money left for personal development.It is better not to get in to litigation as who deposit money in lacs in cash is 99% Tax evader.

  7. GANDHI MOHAN BHARATI says:

    I wonder as to why we have a Department called Income Tax Department & CBDT with CPCs, if individuals & Banks & Institutions have to report all things; Then why PAN and make it mandatory for quoting the same at various places. Should the Department Officials be paid salary or the Individuals who report them need it?
    I feel that the Department people should work rather than forcing others to report, take their own time to analyse, and expect fees for delayed reporting from others.
    There should be a time limit of 6 months to Department to analyse and seek details from Tax Payers giving reasons for seeking details rather than send them notices blindly.
    I live in a village where people do not understand the law in English or Hindi. They are mortally afraid. This will not augment well with the present Government, though their intentions my be noble.
    They feel that the Government is chasing the poor and middle class who are helpless whereas the rich protect themselves with very affluent Auditors and battery of lawyers.
    They ask a simple question of how many corrupt Politicians have been punished; the cases drag on till their death

  8. Ravi says:

    Nothing will happen for 2.45 lakh

  9. Ravi says:

    Nothing will happen

  10. Ranjan Rajourya says:

    TaxGuru really need a decent review committee before approving such articles for their website. It is gradually turning into a comic book instead of a professional portal which it is supposed to be.

  11. rugram says:

    One important point not added by the learned author in respect of reporting transactions of fixed deposits is, that the amount of Rs 10 lacs mentioned does not include renewal of earlier deposits.

  12. S Balasubramanian says:

    If your past tax returns reflect an income of much more than Rs. 2.45 lacs, nothing much to be concerned about.

    The figure of 2.45 suggests that this is the amount just below Rs. 2.50 lacs. The department may invite additional particulars from you.

    You should be armed with answers such as to why you kept this much cash at home.

  13. D.K.MOTIWALA says:

    Relax , There r people in long Q who had deposited 2.4 cr. or more . U just need not to worry . In india paanwala , chaiwala , roadside vendors , bhajiawala etc have more then 24 crore . Sone ki chidia Bharat desh hamara .

  14. Pratik Patel says:

    Hello Sir,

    The article is very good, specially the story telling format.
    Thanks for sharing the knowledge.

    Regards,
    CA Pratik

  15. Jayashree says:

    Sir,

    I am a house wife and have deposited Rs 2.45 lakh in cash .
    What might be the consequences?

    Regards

    Jayashree

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