No Penalty on High Denominations Notes Deposited into Bank if…

No penalty on high denominations notes deposited into bank if such amount is declared in return of income by paying appropriate tax: Generally I refrain from expressing any professional opinion on Facebook.

However, in view of prevalent panic created by certain media over imposition of penalty on unaccounted cash of high denominations that are deposited into bank, I give my professional opinion as under.

If unaccounted cash or black money are deposited into bank and appropriate tax (maximum 30% plus surcharge) is paid on this additional income, no penalty for under reporting or misreporting can be imposed by assessing officer u/s 270A of Income tax Act,

which has been newly introduced from current year. Even, tax payer is not required to substantiate source of income and income can be declared without disclosing head of income. This is because penalty for concealment can be levied only on difference between assessed income and returned income.

This view is based on bare reading of section 270A itself. So penalty of 200% under no circumstances can be levied on such income disclosed in return of current year. With due respect, I have to say that The news paper headlines that ‘200% penalty on unaccounted cash deposits of over ₹ 10 lakh’ published in today’s Time of India and other media are misleading.

I therefore advise not to sell the notes at discounted prices or deposit the cash into bank accounts of other benami persons in fear of penalty. Further, do not claim any bogus expenses or bogus loss to gain more trouble.

Do not manipulate accounts by creating bogus cash on hand. Be good citizen and pay tax honestly to buy peace by building capital. This disclosure by paying tax at maximum of 30% will be advantageous compared to IDS where rate of tax was 45%.

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4 thoughts on “No Penalty on High Denominations Notes Deposited into Bank if…

  1. Dear Deepak,

    I am a finance professional however not an expert but as far as I understood what the government want to communicate is:
    First is that if someone want to save money it is a good habbit but my question is that if that person want to save then why not in banks?If the person is saving from over last 6 years then it means that he is saving for future not for meeting his current expenditure. So the one can easily deposit the money in the bank or in post office in some fixed saving scheme and will get his money almost doubled.
    Now the problem is that person is saving only in form of hard cash which is very much wrong although that money will not be counted as black money but because of his hoarding of hard cash the economy suffers as the cash just goes out of circulation and RBI has to print more notes to meet the demand in the market which is also a major cause of inflation.
    And finally please don’t be panic you can easily deposit this money to bank but you must ensure that you must have valid source of these funds you can easily explain this that that income is your saving nobody will harass you.As this move is not to harass normal public but to bring out the hoarded money back into the circulation and to warn those people who are not paying their tax honestly and evade tax willingly.(tax evasion)
    Also auto walas and small shops receipts don’t attract tax liabilities as their turnover and receipts are usually below threshold limit.

  2. I have one clarification in this regard looking at the panic being created by the media and misleading normal people on their hard earned money. I want your inputs on the scenario that I will illustrate below.

    Consider a person who is a daily wage earner who is earning money by providing his service like pan shop, mechanic, local retailers, auto wala, or anyone whose income is coming daily. And this person earns sufficient amount which is less than or equal to income tax slabs for all the years. For simplicity consider last 6yrs although he is working for past 20years.

    Now the tax slab for last 6 years is 1.6lks, 1.8lks, 2lks, 2lks, 2.5lks, 2.5 lks which combined is 12.4 lakhs now consider that his income was 90% of income tax slab so over last 6 years he has earned 11.16 lakhs and taking that he is saving 1/3rd of his income which is 3.72lakhs.
    Given that he has savings of around 4lakhs which is above the limit of 2.5 lakhs of deposit during this 50 day period how can he justify this.
    Since his income was always less than it slab he has not filled any returns and has no knowledge on residing his small shops or service he is providing. How can this person deposit 4 lakhs in his bank account and save all his money. I am considering that he has either no bank account or his account has meager amount.

    What about the person who is working for 10yrs or 15 years or 20 years and has savings of over 10 lakhs which he has been saving for purposes like children’s marriage or buying house etc his life will be ruined.
    This is what I believe is worrying them and they are afraid to deposit the money in bank account. They become the prey of opportunits and fear losing their lifetime saving.

    Please help the people in this regard by clarifying their issues and share on all social media platforms to clear the air.

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