No less than 50 percent tax could be levied on inexplicable bank deposits made when using banned currency notes around December 30, 2016 including a four-year lock-in period for One half of the remaining amount underneath the amendments to tax law the government plans to usher in Parliament shortly. However, a greater 90 percent tax and penalty might be enforced if people don’t declare the unaccounted cash under their own accord. Cash deposits made while using old currency of Rs.500 and Rs.1,000 notes over a threshold which can be declared to Tax government bodies may attract 50% tax, as reported by the amendment towards the Tax Act authorized by the Cabinet yesterday.
One half of the remaining deposits, or 25 % from the original deposit, won’t be allowed to be withdrawn for 4 years, sources stated. In a situation where such deposits aren’t declared and therefore are detected by tax government bodies, as many as 90 % tax and penalty might be imposed, they stated. The government had given a 50-day window beginning from November 10 either to deposit the now invalid currency in circulation or exchange it for brand new notes.
As the exchange, which was restricted to a maximum of Rs 2,000 per person, continues to be withdrawn, all old notes with no ceiling could be deposited in accounts. This, sources stated, had brought some boost in bank deposits, specifically in zero-balance Jan Dhan accounts that have grown by over Rs 21,000 crore in only two days, raising suspicion that these accounts might have been accustomed to launder black money. As the tax government bodies had spoken of levying an optimum rate of tax and 200 percent penalty on the top from it for just about any inexplicable deposit above Rs. 2.5 lakh between November 10 and December 30, it had been felt that this type of move might not have legal backing.
To plug individuals loopholes, the cabinet is considered to possess yesterday approved amending the Tax Act with the addition of a clause within the sections to maintain the tax with an inexplicable earnings throughout the window, sources stated. The federal government intends to bring the amendment for approval in early next week after getting the President’s nod. Sources stated demonetization would be a major key to uproot black money and corruption nevertheless its purpose could have been defeated when the ill-become wealth was deposited through benami deposits. And taxing them was a method to punish dishonest people. The tax rate, however, can’t be just like for honest tax payers. Additionally, it couldn’t function as the 45 percent tax and penalty billed on hereto undisclosed wealth introduced to books utilizing a one-time compliance window underneath the Earnings Disclosure Plan (IDS) that ended on September 30.
Sources stated because the black money holders didn’t make use of the government offer to declare their unaccounted wealth, they ought to pay a greater rate of tax now and curbs put on its usage. The federal government can also be contemplating on developing a bond where the 25 percent “lock in” money could be parked and could be withdrawn after 4 years through the depositor. From the additional taxes on inexplicable and undisclosed deposits, the federal government can create a fund to construct rural infrastructure.