Are you worried about the Income Tax notice coming your way? On November 8, 2016, the Government of India has taken a historic step to fight with problems of black money, corruption, and parallel economy. This historic step was to demonetize the currency notes of Rs. 500 INR and Rs. 1000 INR.
There was a research conducted by the use of these currency notes. And, it was found that 80% of these notes are used to run the parallel economy. Demonetizing of these currency notes had a great effect on people who have a large amount of black money with them.
Scenario that Prevailed in India Prior to Demonetization
The government of India requested all the citizens to deposit the old currency notes in their bank accounts. The premise behind this demonetization was that most of the transactions done for illegal purposes are always through cash.
These transactions could rarely get tracked, and therefore people involved in such transactions easily escape from the eyes of Income Tax department.
But Not All the Cash Transactions are a Form of Black Money
- It is very well accepted that all the large transaction cannot be called black money. But still, cash transactions are not easy to monitor and track
- Many transactions in cash take place every day. Therefore, it is very difficult for our government to distinguish such transactions
Will You Receive an Income Tax Notice for having deposited more than Rs 10 lakhs in cash?
The taxation authorities have observed that there are many accounts in which people have deposited more than Rs. 10 lakhs, after November 8, 2016. As per the latest data, there are around 1.5 lakhs such accounts in which more than Rs. 10 lakhs have been deposited. Yes, if you have deposited over Rs. 10 lakhs, then you may be in the queue for receiving an Income Tax notice from the Income Tax department of India.
What if You have Deposited More than Rs. 10 Lakhs After 8th Nov 2016?
The government is planning to approach these account holders and inquire about the source of that money. The government will be launching an online platform, through which following activities could be conducted:
- The government will approach those account holders through this platform issuing an income tax notice
- The account holders will have to submit all the information online after receiving this notice within set dates
- The tax officers will review it, and if they need any additional information, they may again send a request online
- The account holder will share the additional information online through that platform only
What is the Benefit of Online Platform?
This will be very helpful in maintain transparency among the account holders and tax officers. The process of sending the queries is already started. Banks are also requested to submit the details about cash deposition by the end of January 2017. The tax department is also keeping an eye on big purchases done using the old currency notes.
So What is way forward , if you receive an Income Tax Notice for having deposited Cash in Bank Account
- Please make a Cash flow for the year for which notice has been received PLUS two years before. You can understand the basic process of making cash flow from here. This cash flow is not to be shared with any tax authority until asked for and even in that case, share under some expert legal advise
- Work out the cash surplus available out of the cash flow as made above and try relating with cash deposited
- Similar cash flow can be made for all eligible members of the family
- It would be good idea to stay prepared for such notice asap, even God willing you dont receive it. Make a cash flow for current year FY1617 as well
- Deposit some advance tax for the cash generated in current year
- Still finding some gap…. may consult a legal expert
Related Read- Why you need to Hire a Tax Professional to file your Income Tax returns
