Cash deposits above Rs 2.5 lakh could attract tax and penalty and authorities might take away 90% of your money if there is an income mismatch, according to a government decision on Wednesday. The mathematics is simple, during the transition government will have the details of your deposits of old notes. That will be easily be matched with your return income that you file into Income Tax Department.

Revenue secretary Hasmukh Adhia answers the four frequently asked questions:

A lot of small businessmen, housewives, artisans, workers may have some cash lying around as their savings at home. Will the income tax department ask questions if the same is deposited in banks?

Such group of people, as mentioned in the question, 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 small deposits made.

Our Comment: But it will be accounted in your Financial Year Taxable Income. Where you cannot cut your own TDS?  Housewives with that small amount may be feel safe, but people who are earning let say som what 5 Lacs a year and eventually they found they have old notes around 1.5 lac, then your gross income will be 6.5 lacs. So you have to pay your tax on this  money eventually. Unless you have your wife account who is housewife. 🙂

Will the income tax department be getting reports of cash deposits made during this period? If so, will the current threshold of reporting requirement of reporting cash deposits of more than Rs 10 lakh will only continue?

We would be getting reports of all cash deposited during the period of November 10 to December 30 above a threshold of Rs 2.5 lakh in every account. The department would match this with income returns filled by the depositors. And suitable action may follow.

Suppose the department finds that huge amount of cash above Rs 10 lakh is deposited in a bank account, which is not matching with the income declared, what would be the tax and penalty to be paid on the same?

This 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.

It is believed that a lot of people are buying jewellery now. How does department plan to tackle this?

The person who buys jewellery has to give his PAN number. We are issuing instructions to the field authorities to check with all the jewellers to ensure that this requirement is not compromised. Action will be taken against those jewellers who fail to take PAN numbers from such buyers. When the cash deposits of the jewellers would be scrutinised against the sales made, whether they have taken the PAN number of the buyer or not will also be checked.

You need to know that there will be law will come soon on Land , Gold and any passive asset to prevent black money.