After the announcement of the demonetisation of Rs 500 and Rs 1000 notes, several instances of trashed high denomination currency have come to light.
Black money hoarders are trying to find ways to launder their illegally turned money after the announcement that Income Tax Department may slap a hefty 200 per cent penalty on unexplained high cash deposits in banks.
“We would get the details of accounts in which more than Rs 2.5 lakh have been deposited. Any mismatch with income declared by the account holder will be treated as a case of tax evasion,” Revenue Secretary Hasmukh Adhia said last week.
Not everyone who deposits heavy amount are black money holders, some have earned the money legally and saved it up for years without depositing it into banks.
The phones of Chartered Accountants and tax experts have been ringing since the announcement, with people asking for ways to save tax on their cash.
Here are some of the ways people are using to explain the amount they deposit in the bank:
Savings by housewives:
It is the habit of Indian housewives to save some of the money out of the monthly household budget away from the eyes of everyone for emergencies. There is no cap on the savings under tax laws but a reasonable amount can be declared under the category. Nearly 10 per cent of the total income of a taxpayer may escape the grip of tax laws as savings by homemakers.
Income from tuitions, other classes:
Homemakers and college students earn substantial amount of money by taking tuitions and other sort of classes. However, this income needs to be declared and an income tax needs to be paid.
Tax laws allow delayed returns to be filed and there is a small 1% penal interest charged for every month of delay in case there is some tax due.
If the savings under this category are few lakhs, you can get away by paying income tax and little penalty. However, if the income is reported too high, tax authorities may ask the assessee to furnish the names of students and other proofs.
You can show the exceeding amount as gifts received from relatives. Gifts received from certain specified relatives are exempted from income tax if the recipient is an adult.
However, the amount under this category should be reasonable and should not seem exaggerated. 4-5 per cent of total income of a family could escape the sharp scrutiny by income tax authorities. In case the amount exceeds reasonable limits, I-T department may ask for names of relatives and they themselves may come under scrutiny.
Gifts on wedding and mundane ceremonies:
Recently married tax payees can show the exceeding amount as cash received on wedding. Those with children, who recently had their mundan ceremony, can also declare some cash as gifts received on the occasion.
“Wedding and mundan ceremonies are two occasions when gifts from non-relatives are also tax-free. They can show the cash as gifts received on these occasions,” the Economic Times quoted Chartered Accountant Minal Agarwal.
Again, the amount shown should be reasonable and should be in line with the financial status of the family.