Arjuna (Fictional Character): Krishna, 26th January i.e. our Republic Day is coming closer. On this day, the unity and the strength of our country is represented through parade by our army, navy and by air force. There is parade exhibiting the cultures and specialties of various states. After demonetization, the government has released a notification on 17th January to take parade of the people depositing cash above Rs.10 Lakhs. What is that notification all about?
Krishna (Fictional Character): Arjuna, on this Republic day, there is an atmosphere of celebration and patriotism everywhere. On this day, on Rajpath various parades take place in a very grand way. People of other countries are also keen to watch the parade. It seems that this year there will be a special parade representing “Pradhan Mantri Garib Kalyan Yojna” and behind it there would be parade of people who deposited cash above Rs.10 Lakhs. This means there would be inspection of whether taxpayers have paid tax on the transactions effected by them. As the cash deposited in the banks post demonetization was far more than what government had expected. To regulate it, the government will send notices to people. The government has issued notification on 17th January 2017 to collect information for sending notices to people. The limit for this is being kept as Rs.10 Lakhs.
Arjuna: Krishna, what has the government stated in the notification?
Krishna: Arjuna, as per the section 285BA of Income Tax Act, 1961, specified person i.e. bank, company, people to whom tax audit is applicable, etc. have to give statement of their financial transactions. Under this, the nature and value of transaction is mentioned in rule 114E of income tax act. If a specified person is required to furnish any information mentioned in the rule, then such person will have to provide the details to income tax department in online Form 61A. Every taxpayer will have to submit such form by digitally signing it. The taxpayer will have to get registered by logging on to the website. After that, details will have to be given in Form 61A. The last date to file this form is 31st May for the financial year 2016-17. If the taxpayer does not file this form, then he will have to pay a penalty of Rs. 500 per day. If the form is filed late, then Rs. 100 penalty per day will be levied.
Arjuna: Krishna, which details will have to be provided by banks under this rule?
Krishna: Arjuna, every bank and post master will have to give the following details:
- Details of person purchasing bank draft or pay order in cash above Rs 10 lakhs in a financial year.
- If cash is deposited or withdrawn in or from a current account exceeding Rs.50 lakhs in a financial year, then details of such person will have to be given by bank.
- If cash is deposited above Rs.10 lakhs in a saving account in a financial year.
- If investment is made in fixed deposit of more than Rs.10 lakhs in a financial year.
- If payment is made above Rs.1 lakh in cash or Rs.10 lakh by any other mode for payment of credit card.
- If cash is deposited above Rs.12.5 lakh in current account or above Rs.2.5 lakhs in saving account from 9th November to 30th December 2016. Also, the details of cash deposited by such person from 1st April to 9th November 2016 will also have to be given. The last date to submit such details is 31st January 2017.
Arjuna: Krishna, which details are required to be provided by person other than banks?
- If a person to whom tax audit is applicable receives an amount exceeding Rs.2 lakhs in cash for rendering any service or sale of goods, then details of such person are required to be given.
- Details of a person purchasing shares of a company of above Rs.10 lakhs would be required to be provided by the company.
- Any person investing in bonds or debentures of a company for more than Rs.10 Lakhs.
- Every registrar and sub-registrar will have to provide details of a person selling or purchasing an immovable property for more than Rs.30 lakhs.
- Details of a person paying more than Rs.10 lakhs for acquiring units of one or more schemes of a Mutual Fund, then the details of such person will have to be provided by the mutual fund company.
Arjuna: Krishna, what will the government do after collecting such information?
Krishna: Arjuna, on the basis of such details, the government will send notices. Every person in receipt of such notice will have to answer them. If they are satisfied with the answer, then no further action would be taken. If the answer is not satisfactory, then the department may make such person to go in the “Pradhan Mantri Garib Kalyan Yojna”. Otherwise, tax will be collected along with huge penalty and interest. The government has provided clarifications on Pradhan Mantri Garib Kalyan Yojna in an FAQ released by it on 18th January 2017. A person participating in this scheme will have to pay tax at the rate of 49.9% and will have to deposit 25% of such declared value in bank account without interest.
Arjuna: Krishna, what should taxpayers learn from this?
Krishna: Arjuna, government wants to get hold of the people evading tax. If a person enters into a transaction above Rs.10 lakhs, then he will have to face the income tax notices. A person, who has deposited money which has been earned by evading tax, should participate in the scheme of the government and get relieved. Otherwise get ready to face the worst of the consequences. Every person should pay tax on the income earned and contribute towards the growth of the country. A very happy Republic Day to all.
Tags Income Tax