No mention of small deposits in proposed bill to amend the income tax laws
The Lok Sabha on Tuesday passed by a voice vote a bill to amend the income tax laws.
Post the announcement of demonetisation, Prime Minister Narendra Modi and Revenue Secretary had said that no investigation will be made for deposits of up to Rs 2.5 lakhs in bank account, but no mention of small deposits have been made in the proposed amendment to Income Tax Act, Daksha Baxi, Executive Director, Khaitan & Co said.
The Lok Sabha on Tuesday passed by a voice vote a bill to amend the income tax laws to facilitate levy of 60% tax on undisclosed income or investment or cash credit deposited in banks after the November 8 demonetisation.
According to the Taxation Laws (Second Amendment) Bill, 2016, the declarant will have to pay a tax of 60% and an additional surcharge of 25% of the tax (i.e. 15% of such income), resulting in a total tax component of 75%.
Baxi, said that as there is no mention of small deposits in the amendment, it is likely to create a widespread nervousness and confusion for lot of people who would have deposited such small amount in their accounts. It is very likely that such amount deposited constituted their household savings accumulated over a period of time from their legitimate earnings.
Moreover, she said that such small deposits could attract tax at higher rate of 60% plus surcharge/penalty unless it is properly explained. "A specific clarification from Government on this important aspect will be very helpful to avoid litigation and will be fair to the people and in accordance with the laudable policy of the NDA Government that they are committed to promote a non-adversarial / certain tax regime in India.”
Suresh Sadagopan, Founder, Ladder7 Financial Advisories, said, "This is a great move to make those holding black money to come clean & atleast get to retain some amount ( about 50% ), instead of being perpetually in the fear of getting caught'.
"25% of the money will also be locked up for four years without interest. The overall taxes come to 50% - 30% is the tax, 33% is the cess on that tax ( which is about 10%) & another 10% penalty".
Archit Gupta, Founder & CEO ClearTax.com, said, "The penalty for non-disclosure are steep and the amendment has laid down penalty of 50% for self disclosures, which is only slightly higher than Income Declaration Scheme which closed on 30th September".
"Those with unaccounted income have an excellent opportunity to put things in order this time. They can now start maintaining proper books of accounts and file tax returns".
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