Cash deposits above Rs 2L to be disclosed in ITR forms

The government’s war against black money is finding its expression in every reform that it makes. The recent being the introduction of the new one-page ITR forms. Where these forms are making it way easier for taxpayers to file their returns than before, it also seeks details of cash deposits of more than Rs 2 lakh made during the demonetisation period. Taxpayers will now have to give details about the money (more than Rs 2 lakh) deposited between November 9 and December 30. Part E of the form will have columns for these details to be filled up by the taxpayer.

The intention as specified by the government is only to collect data for the cash deposited by individuals and that they do not intend to send any notices to anyone through this exercise. The government has also clarified that they will not question any individual depositing cash below Rs 2.5 lakh during that period.
 
The intention of the government behind this can be manifold since it will generate a lot of database.

Some of the possible areas of generating useful information can be as follows:

• Aggregation of all the amounts deposited across all bank accounts
  This information will give the aggregate amount of cash deposited in all the accounts of an individual including the accounts where the taxpayer’s PAN is not registered. Hence, all the accounts that are not yet mapped to PAN numbers will be disclosed in the ITR form.
  
• To identify all those taxpayers who have deposited cash of more than Rs 2.5 lakh
  Secondly, its main intention can be to identify those taxpayers who have deposited cash in excess of Rs 2.5 lakh during the demonetisation period. The tax department will try to reconcile the treatment of these deposits in the tax return and check whether the taxpayer has offered it under the Pradhan Mantri Garib Kalyan Yojna (paying 50% taxes and depositing 25% in the scheme) or has given some different treatment.

In case the tax department identifies that the taxpayer has failed to disclose it in the tax return or has offered it under the normal provisions of the act and paid the taxes accordingly as per the normal rate, it will further investigate into the reasonability of such treatment. If the taxpayer fails to provide proper justification, he may have to pay tax @60% + surcharge @25% of such tax along with education cess @3% totaling to 77.25%. In addition to this he may also be subjected to penalty of 10% and prosecution under The Taxation Laws (Second Amendment) Act, 2016.

The only way to avoid this penalty is to disclose the details of cash deposited during the demonetization period in the tax return. Further if the source of these cash deposits cannot be explained then offering it under the Pradhan Mantri Garib Kalyan Yojna as discussed above is a safe option.

The government with all these measures is making sure that there is minimum hassle to even those who might have huge reserves of black money by taking advantage of the schemes.

Apart from this, the new ITR forms have some more new fields that are marked mandatory like quoting of the 12 digit Aadhaar enrolment number. This will also help in tracking those who have not enrolled for Aadhaar. Statistics reveal that although 111 crore people in India are already enrolled under Aadhaar, there are only 25 crore PAN card holders.

Government tax reforms in the recent times are all aimed at better compliance at the same time making sure that their intention to eradicate black money from the system is fulfilled. Although these measures might seem tedious for the common man at large there are larger benefits in these that will help make lives easier for everyone.

(The writer is Head of Tax Research, H&R Block India)