‘Suspicious Deposits’ Made After Currency Ban May Attract 60% Tax

The Cabinet on Thursday discussed amending laws to levy close to 60 percent income tax on unaccounted deposits in banks above a certain threshold post demonetisation of high-denomination currency notes, an official in the finance ministry said on the condition of anonymity.

The move comes amid banks reporting over Rs 21,000 crore being deposited in zero-balance Jan Dhan accounts in two weeks after the Rs 500 and Rs 1,000 currency notes were banned, which authorities apprehend may be the laundered black money.

There was no official briefing on what transpired in the meeting that was called at short notice as Parliament is in session. Traditionally, there could no disclosures outside on any policy decision taken during the sitting of Parliament. The official quoted above said the government is keen to tax all unaccounted money deposited in bank accounts after it allowed the banned currency to be deposited in bank accounts during a 50-day window from November 10 to December 30.

To that affect, the government plans to bring an amendment to the Income Tax Act during the current winter session of Parliament to levy a tax that will be higher than 45 percent tax and penalty charged on black money disclosed in the one-time Income Disclosure Scheme that ended on September 30, he added.

As for those black money holders who did not utilise the window, they would be charged a higher rate which could be close to 60 percent that the foreign black money holder had paid last year. Sources told PTI the government is keen to root out benami deposits, particularly in Jan Dhan accounts.

There was also talk of the government imposing a limit on domestic gold holding, but it is not clear if the proposal was discussed at the Cabinet meeting chaired by Prime Minister Narendra Modi tonight. Modi's November 8 shock ban on high-denomination currency notes had swept away 86 per cent of the currency in circulation in the biggest-ever crackdown on black money, corruption and counterfeit currency. The move had led to Rs 14 lakh crore worth currency being withdrawn from circulation.

Sources added that the government may come out with a deposit scheme or an instrument like bond where the cash savings in the banned notes could be deposited.

A 50-day window was given to holders of the old currency to deposit in their bank accounts. But the penal tax provisions were deterring many.

There have been various statements on behalf of the government ever since the demonetisation scheme was announced on November 8, which has led to fears of the taxman coming down heavily on suspicious deposits that could be made to launder black money.

In the past, officials have talked of a 30 percent tax plus a 200 percent penalty on top of a possible prosecution in cases where black money holders took advantage of the 50-day window for depositing the banned currency.