Deposits up to Rs. 2,50,000 have not been given any blanket tax-free status. Only such deposits will not be reported to the Income-tax Department by banks/post offices.
The Law At Present:
The following clarifications in government Press Release dated 10-11-2016 may be noted:
Q.1 A lot of small businessmen, housewives, artisans, workers may have some cash lying as their savings at home, will the Income-tax Department ask questions if the same is deposited in banks?
A.1: Such group of people as mentioned in the question need not worry about such small amount of deposits up to Rs.1.5 or 2 lacs, since it would be below the taxable income. There will be no harassment by Income Tax Department for such small deposits made.”
Q.2: 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 lacs will only continue?
A.2: We would be getting reports of all cash deposited during the period of 10th November to 30th December, 2016 above a threshold of Rs. 2.5 lacs in every account. The department would do matching of this with income returns filed by the depositors. And suitable action may follow.
1. Tax-free status is for those whose total income does not exceed threshold limit of Rs. 2,50,000/Rs. 3,00,000/Rs. 5,00,000. One can imagine that savings of people with meagre income are not likely to exceed this amount. If they can prove they saved higher amount because they live in joint family and other family members have more income, then even higher cash deposits will not be taxed.
2. Housewives can even get exemption for higher cash deposits if it is savings out of pin money given to them by husbands for their expenses. Only that it will have to be established that husband is regular ITR-filer and has disclosed sufficient incomes and made sufficient cash withdrawals or transfers through banking channels to wife
3. Those whose cash deposits during the period 09-11-2016 to 30-12-2016 do not exceed Rs. 2,50,000 will not be picked up for scrutiny automatically as no reporting of the same is done by banks/post offices. But if their returns are picked up for scrutiny on random basis, this deposit can be examined and taxed at 30% if not satisfactorily explained. There is as yet no instruction from department to income tax officers to ignore demonetized notes deposited in bank account up to Rs. 2,50,000 during scrutiny assessment.
4. Again it is not as if you have Rs. 10 lakhs in old notes and you have four bank accounts and you deposit Rs. 2.5 lakhs in each of the 4 accounts, your Rs. 10 lakhs has become tax-free. Your accounts may not be reported by bank/post office to Income tax department. Also, remember all the four accounts are under your PAN number. But if your return is picked up in scrutiny at random, all four bank accounts will be called for and checked and if you fail to explain source of the amounts satisfactorily, then you will be taxed flat 30% on Rs. 10,00,000 without allowing for any regular threshold exemption limit as above.
Very useful information explained clearly for even a lay person well done thanks
Dear Sir. Greetings
Wonderfully explained and any layman with sufficent profeciency in English Language can fully understand.
Kudos Keep it up