Centre is mulling a threshold for deposits made into banks post demonetisation below which scrutiny will not be initiated.
The government is considering the proposal to prevent undue harassment of taxpayers during investigations into bank deposits between November 10 and December 30, reports Times of India.
As elections to five state assemblies near, the government is being observant to avoid any bad publicity resulting from honest deposits being questioned.
The proposed move comes as tax authorities prepare an action plan amid reports that large-scale deposits have been made by "money mules" which has resulted in as much as Rs 4 lakh crore of unaccounted wealth finding its way back into banks.
The tax department is reportedly analysing a mountain of data related to demonetised currency notes.
Initially, the government had said cash deposits of Rs 2-2.5 lakh made by housewives and small businessmen and traders would not be questioned
"Arbitrary action will anger public opinion that has largely supported demonetisation. We don't want an inspector to start proceedings," TOI quoted a tax official as saying.
In an interview, Niti Aayog vice-chairman Arvind Panagariya had told TOI that there should be clear-cut rules to reduce discretion by tax officers. "First, we could adopt a rule that barring exceptional circumstances, bank deposits made between November 8 and December 30 below a specified threshold will not be subject to scrutiny," he had said.