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