Watch out for the 200% penalty: Deposit only what you can account for

If you have hoards of cash and wish to deposit it into the bank, do so if you can only account for that income as the government has said there will be a massive penalty incase of mismatch between the two.

If tax men find out that money deposited is not matching with the income declared,it would be treated as a case of tax evasion and the tax amount plus a penalty of 200% of the tax payable would be levied as per the section 270(A) of the income tax act. Hence,  authorities might take away 90% of your money if there is an income mismatch.

Imprisonment?

The tax defaulter could also attract prosecution under Section 276C of the Act, with imprisonment from three months to seven years with fine, said experts.

“One should be in a position to match the cash in hand with income from business operations,” said Pallav Pradyumn Narang, partner, Arkay & Arkay, a Delhi-based chartered accountancy firm. Businesses would have barely four months in the current financial year to justify the cash hoard as business income. Alternatively, they should be in a position to establish that the cash was withdrawn for business purpose. 

If the amount is unaccounted for, various provisions of Income-Tax Act, 1961, will come into effect. “If the sources of income are unaccounted for, these would be deemed to be current year’s income under Section 69A of the Income-Tax Act, 1961, and will attract income tax at the rate of 30% along with applicable surcharge and education cess, under Section 115BBE of the Act,” said Neeru Ahuja, partner, Deloitte Haskins & Sells.

But what about housewives, small artisans and businessmen?

A lot of small businessmen, housewives, artisans, workers may have some cash lying around as their savings at home. 

They need not worry about such small amount of deposits up to Rs 1.5-2 lakh, since it would be below the taxable income. There will be no harassment by income tax department for such  deposits made.