The government on Friday warned housewives and workers that even small deposits made into their bank accounts could attract taxes and penalties and leave them open to prosecution for abetting tax evasion if the money did not belong to them. Earlier, the government had said it would not scrutinise deposits of up to Rs. 2.5 lakh, and small deposits would not be questioned by the IT dept.
“There are some reports received that some people are using other persons’ bank accounts to convert their black money into new denomination notes for which a reward is also being given to the account holders who agree to allow their accounts to be used. This activity is reported in case of Jan Dhan Accounts also,” the Finance Ministry said in a statement on Friday.
“It is hereby clarified that such tax evasion activities can be made subject to income tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else,” the statement said, adding “...the person who allows his or her account to be misused for this purpose can be prosecuted for abetment under Income Tax Act.”
According to the Income Tax Act, those with an annual income of less than Rs 2.5 lakh are exempt. People who genuinely have their savings in cash and deposit them in their bank accounts will not be prosecuted, the ministry said, exhorting all those with information of such activities to come forward and report them.
“Black money is a crime against humanity. We urge every conscientious citizen to help join the government in eradicating it,” the statement concluded.
“The onus of proving that the amount deposited is genuine is on the taxpayer,” Kuldip Kumar, Partner & Leader, Personal Tax, at PwC India told The Hindu . “If, say, a housewife says that she has saved a large sum in cash and is now depositing it, then she will have to show what her husband’s income is, what the household expenditure is, how much they can save, and then show that the amount deposited is reasonable.”
“The government notification that there would be no scrutiny on deposits under Rs 2.5 lakh was anyway advisory in nature, it had no basis in the law,” Girish Vanvari, Partner and Head, Tax, KPMG in India said. “Technically, they can scrutinise even a deposit of one rupee.”
“The Budget hasn’t even come yet, so they can add any provisions they want in the Budget to allow taxation on any category they want,” Mr Kumar added.
