Cabinet discusses income tax penalty on large deposits

A man displaying Rupee one thousand notes after Central goverment order of demonetisation of 500 and 1,000 rupee Indian currency  in Srinagar on Wednesday.

The Cabinet meeting called by Prime Minister Narendra Modi late on Thursday evening is believed to have discussed changes in tax laws. Sources say the meet discussed levying a heavy income tax on large amounts of unaccounted deposits in banks in the 50-day window from November 10 to December 30.

The government is keen to heavily tax all unaccounted money deposited in bank accounts post the November 8 decision to ban high-denomination currency notes of ₹ 500 and ₹ 1000.

There was no official briefing on what transpired in the meeting that was called at short notice as Parliament is in session. Traditionally, there could be no disclosures outside on any policy decision taken during the sitting of Parliament.

The meet comes amid banks reporting over ₹ 21,000 crore being deposited in zero-balance Jan Dhan accounts in two weeks after the 500 and 1,000 rupee notes were banned, which authorities apprehend may be the laundered black money.

There have been various statements on behalf of the government ever since the demonetisation scheme was announced on November 8. Officials have even talked of a 30 per cent tax plus a 200 per cent penalty on unaccounted money.

The Income Tax Department had previously warned that cash deposits above Rs 2.5 lakh threshold post demonetisation decision could attract tax plus a 200 per cent penalty in case of income mismatch.

It was stated that the department was tracking all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account.

Sources said the government plans to bring an amendment to the Income Tax Act during the current winter session of Parliament to levy a very heavy tax and charge penalty on black money disclosed in the one- time Income Disclosure Scheme that ended on September 30.

As for those black money holders who did not utilise the window, they would be charged an even higher rate.

Sources said the government is keen to root out benami deposits, particularly in Jan Dhan accounts.

The government’s demonetisation move had swept away 86 per cent of the currency in circulation in the biggest-ever crackdown on black money, corruption and counterfeit currency. The move had led to ₹ 14 lakh crore worth currency being withdrawn from circulation.

(With inputs from PTI)