The government and the Reserve Bank of India (RBI) on Wednesday made it clear that cash deposits above Rs 50,000 per day in their bank accounts during the 50-day window will be monitored by the income-tax department to check misuse of the demonetisation drive.
The RBI said anybody depositing more than Rs 50,000 in cash in their bank account has to submit a copy of the PAN card in case the bank account is not seeded with PAN. “In addition to the above provision, in the same IT Rules, PAN reporting requirements are there for other transactions, which banks need to insist upon,” the RBI said, asking banks to ensure strict compliance with the provisions of 114B of the Income Tax Rules, 1962. On the other hand, the government has asked banks and post offices to report to the I-T Department all deposits above Rs 2.5 lakh in savings accounts, and more than Rs 12.50 lakh in current accounts, made during the 50-day window provided to tender the scrapped Rs 500 and Rs 1000 rupee notes. The scrutiny is in the wake of apprehensions that a large number of illegal or black money may sought to be converted into white during the window provided till December 30.
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Banks, co-operative banks and post offices will have to report to the tax department cash deposits exceeding Rs 50,000 in a single day or aggregating to more than Rs 2.5 lakh during the period November 9, to December 30, 2016. These entities will also have to report cash deposits during the period aggregating to Rs 12.50 lakh or more, in one or more current account of a person.
The finance ministry has notified the amended Rule for filing of Annual Information Return (AIR) report by banking company, cooperative bank and post offices on account of aggregate cash deposits in one or more current account of a person. Banks and post offices now have to file a statement of financial transaction in respect of these transactions on or before January 31, 2017, the notification said. Earlier, they were required to report to the I-T Department only when cash deposits in an account exceeded Rs 10 lakh in one full year. The government is likely to amend tax laws to impose a 200 per cent penalty in case of income mismatch of deposits above Rs 2.5 lakh threshold under the 50-day window for exchange of abolished Rs 500 and Rs 1,000 currency notes, sources said.
Revenue Secretary Hasmukh Adhia had earlier said that cash deposits above the prescribed threshold not matching with tax returns will be treated as tax evasion and a 200 per cent penalty will be imposed under Section 270(A) of Income Tax Act. Under the current tax norms, under reporting and mis-reporting of income invites a penalty of 50 per cent and 200 per cent of the tax payable under Section 270(A) of the Act, respectively. However, tax experts feel that the high-value cash deposits for exchange of abolished currency notes may not technically fall under mis-reporting or under reporting of income. The government can impose a 200 per cent if it amends Section 270A of the Income Tax Act.