The Income Tax Department has advised taxpayers to 'Come Clean' on large cash deposits by filing belated or revised income tax returns by March 31st or be ready to face penalty or prosecution, as the case may be.
The Income Tax Department has advised taxpayers to ‘Come Clean’ by filing belated or revised income tax returns (ITR) by March 31st or be ready to face penalty or prosecution, as the case may be. In one of its latest tweets, it says, “There is still time. Belated or revised returns for AY 2016-17 and 2017-18 can still be filed up to 31st March, 2018 (with interest, if any, for late filing).”
It says that if you have deposited large amounts of cash in your bank account or have made high-value transactions, you should consider the same while filing your income tax returns. Non-filing or incorrect filing of income may result in penalty or prosecution.
It is clear, thus, that you can’t dodge the taxmen by delaying your income tax return or filing an incorrect return, particularly in case you have deposited large amounts of cash in your bank account or have made high-value transactions post the demonetisation of high-value currency notes.
The move seems to be part of the tax department’s drive against black money, whereby it is giving people the last chance to come clean or face penalty.
Tax experts say that the demonetisation move by the government has forced all black money hoarders to either part with their stashed cash or disclose it by depositing the same in banks. Some of them may have found ways to exchange their redundant notes without disclosing their illegal wealth but they can still be caught by the I-T Department.
“If caught, they will be heavily penalized. The government has given the taxpayers many opportunities in early 2016 by launching of the Income Declaration Scheme and the new Taxation Laws (Second amendment bill) that was introduced to give another opportunity to tax evaders to come clean,” says ChetanChandak, Head of Tax Research, H&R Block India.
As per the bill, if you declare your income without declaring its source, you were required to pay 50% in taxes. This includes 30% tax on declared income plus 33.33% surcharge on tax, i.e., 10% plus a penalty of 10% of declared income total 50% of the income.
“Apart from this, you were also required to deposit an amount equal to 25% of declared income in the Pradhan Mantri Gareeb Kalyan Yojana (PMGKY), 2016 account on or before 30th April 2017. These deposits were to be made for a period of 4 years. You will get that income back after 4 years, but without any interest. The declaration in Form No.1 under PMGKY was required to be filed by 10th May, 2017,” says Chandak.
However, those who have failed to declare the undisclosed income (cash deposits during the demonetization period) under PMGKY and if caught subsequently will have to:
1. If they are able to relate these deposits to specific Financial Year and are able to explain the manner in which such income was earned, then they can pay taxes as applicable on such income along with the applicable interest and penalty of 30% of the admitted income.
2. However, those who are either not able to explain the year or manner of earning such income have to pay taxes as applicable on such income along with the applicable interest and penalty of 60% of the admitted income.
Therefore, it is important for these taxpayers that they file the Income Tax Return for A.Y. 2017-18 (F.Y. 2016-17) very carefully and declare the cash deposited during the demonetization period in appropriate manner.
“A taxpayer who has not opted for the PMGKY scheme but offers his black money in his Income Tax Returns will have to pay tax and penalty @ 77.25 per cent. But those who do not file the return under the scheme and is caught later with undisclosed income in any scrutiny assessment will have to pay 83.25 per cent of the undisclosed income as tax and penalty,” says Chandak.
Beyond this if you do not declare your cash deposits during the demonetization either under PMGKY or in your tax return for A.Y. 2017-18 and if any raid is conducted on you, then you will have to pay 107.25 /137.25 per cent tax and penalty depending on whether you surrender your undisclosed income during the search or not.
Fortunately, it is still not too late for those who have yet not declared their unaccounted cash deposits. For, “they can still file or revise their tax return for AY 2017-18 on or before 31st March 2018 by declaring it in the appropriate manner and paying the due taxes on it. Remember 31st March is the last date for filing the tax return for AY 2017-18 & 2016-17. So, if any of your unaccounted cash relates to any of these two years, you should immediately file/revise your tax return and set the things right,” suggests Chandak.