Currency withdrawal: 50% tax, 4-year lock-in for unaccounted deposits

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New Delhi, The government proposes to introduce amendments to the Income Tax Act in Parliament next week that will enable it to take penal action against those who made unaccounted cash deposits of scrapped high-denomination currency notes after November 8.

The change in tax law, a month after the government’s one-time compliance window under the Income Declaration Scheme came to an end, will empower tax officials to impose a minimum 50 per cent tax and a 4-year lock-in for half of the remaining amount of unaccounted or suspicious deposits, two persons familiar with the development said.

While this structure will apply to voluntary disclosures, a higher rate of tax and penalty of total 90 per cent tax will be imposed on those who do not disclose their unaccounted cash deposits voluntarily.

These I-T Act amendments were discussed in the Union Cabinet meeting, chaired by Prime Minister Narendra Modi, on Thursday night. “The government will introduce amendments to the Income Tax Act giving effect to this in the ongoing session of Parliament,” a source said, adding that these amendments are likely to be introduced on Monday or Tuesday after seeking the President’s nod.

After the government’s announcement of withdrawal of old Rs 500 and Rs 1,000 notes, the government had stated that cash deposits above the threshold of Rs 2.5 lakh until December 30 will be under the scanner of tax authorities. The tax authorities had said a peak rate of tax and 200 per cent penalty would be levied on such cash deposits originating from unaccounted income made during November 10-December 30, but many experts raised questions on the 200 per cent penalty lacking legal validity.

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