Tax plus 200% penalty on deposits if income mismatch: Hasmukh Adhia

The government will assess how cash deposits after the demonetisation could be brought under the tax net, says Hasmukh Adhia, the central government's revenue secretary, to Dilasha Seth. Edited excerpts:

The markets took a beating on Wednesday morning after the currency demonetisation announcement. Do you consider this a knee-jerk reaction?
 

The decline is on expected lines, a combined effect of both the currency move and the US elections. There could be immediate turmoil but we will encourage people to deposit all their money in banks. We will assess how we deal with the cash and how it can be brought under the tax net.

Is there some reconsideration on the penalty to be imposed on the unaccounted cash that will be deposited? Or will it be between 50% and 200%, as in the income tax law?
 

The penalty will be in line with existing law. If the income is not explained, they will have to pay the penalty, which will come up during scrutiny by the department. Then, there will be penalty and proceedings. The tax amount plus 200% will be levied on cash deposited in bank accounts in the case of income mismatch.

What transactions will the department keep an eye on? 

The government will get a report of cash deposited in bank accounts during this period. We will keep an eye on all transactions. To buy jewellery over Rs 2 lakh, one has to furnish the PAN (the I-T identification). Action will be taken against those jewelers who fail to take PAN numbers from such buyers. We already get information from quoting of PAN for deposits over Rs 50,000 with banks. From third party sources, an annual information return (AIR) is filed by banks accepting a cash deposit of Rs 10 lakh or more in a year from any person. 

What about those who are due to pay tax and penalty for the unaccounted money disclosed under the Income Declaration Scheme?
 

They will need to deposit the cash in banks in the old currency and make the payment using a cheque.

That will be good for those with the 25 per cent tax due on November 30 but what about the instalments to be paid by March 31 and then September 30? May they pay using the old currency they have?
 

No. They will now have to deposit all the unaccounted cash and bring it into the banking channel by December 31. They no longer have the option to sit on the pile of cash till next year. Earlier, they could keep it at home even after IDS and pay in the said installments. Now, they will have to deposit it all.

What about those holding old currency but living abroad?
 

They will have to come to India within the next six months and get it deposited in banks or get it exchanged. They can get it exchanged till March from the Reserve Bank.