Unexplained deposits of Rs 2,000 notes likely to attract IT dept's notice; Check details
Significant deposits after RBI's withdrawal decision is expected to draw the income tax department's attention
In adherence to the Reserve Bank of India’s deadline to deposit Rs 2,000 notes in banks after the central bank recently announced the withdrawal of notes of the particular denomination, people have already started lining up at their respective banks to get over with the work. While the decision has got people back on their toes, it has also created a lot of confusion, just like it did back in 2016 when the central government announced demonetisation. From the process of depositing money to bank limits, regulations, and possible taxes on deposits, a lot of clarity is still needed in several parts. Among these, many are confused regarding whether the cash deposits will attract taxes and it seems that their concerns are right.
Those who possess a significant amount of cash at home and have now chosen to deposit them in their bank accounts may need to keep accurate records and documentation to substantiate the source of their funds. This approach will not only provide clarification to the income tax department but will also address inquiries during the reconciliation process.
Speaking of which, as every deposit will be reported by the bank in the Statement of Financial Transactions (SFT), which will be then submitted to the income tax department, it is quite expected that the department will scrutiny each and every deposit, especially the larger ones.
According to a Business Today report, several tax experts have also shared that significant cash deposits are expected to catch the attention of tax authorities, thus necessitating the need to maintain proper records and documentation.
Large cash deposits of Rs 2,000 notes to attract taxes?
Speaking on the same, Neeraj Agarwala, Partner, Nangia Andersen India said that the cash deposit in bank accounts are subject to reporting requirements as high-value cash deposits will be reported by the bank in the Statement of Financial Transactions (SFT) to the income tax department. Mentioning that the limit for reporting in the SFT is Rs 10 lakh or more for savings accounts in a year and Rs 50 lakh or more for current accounts in a year, he said that the department will utilise the statement to reconcile with the income of the individual. If any discrepancies are found, it will issue a notice to the individual, seeking clarification or necessary details.
Tarun Kumar Madaan, a Tax Head at Coherent Advisors also spoke on the same lines and said that significant cash deposits will potentially draw the tax department’s attention, and if the amount of the deposit doesn’t align with the reported income, it can result in a notice from the department. He further went on to explain that if the taxpayer fails to explain the nature or source of any particular amount or if their explanation is considered unsatisfactory by the IT department, the said amount can be treated as an unexpected income and thus will be subjected to taxation and applicable interest and penalties.
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