The bombshell of demonetization sent shockwaves across the nation, as the government sought to capture money launderers red-handed. The impact on income tax regulations and functionality is also widespread. The Income Tax Amendment Bill seeks to make a smooth transition into this new era of currency and disclosure by Indian citizens.
Fri Jul 01 2022 | Govt. Agencies and Taxation | Comments (0)
A bold pronouncement by the Government of banning Rs.500/- & Rs.1000/- notes to restrain black money, fake currency and terrorist aid created ripples in the country. In order to redeem and declare the undisclosed cash as their income, the holders have to deposit it into their respective bank accounts. Each suspicious bank deposit can be scrutinized by Income Tax department, which thereby involves grueling exercise by IT officers. With the objective to ensure lawful compliances on unaccounted income/cash disclosures and to curb illegitimate means of manipulating tax departments, the Government has introduced certain penal provisions in Income Tax laws that are expected to support the purpose of demonetization.
In view of demonetization, Lok Sabha, the lower house of the Indian Parliament, has recently passed the Income Tax Amendment Bill, which highlights the following propositions and amendments:-
The objective of introducing these amendments in taxation laws of India is to cover the loopholes that were possibly utilized to hide black money. These proposed amendments can levy higher tax rates and severe penalties, which can ensure that defaulters can come forward to declare their undisclosed income to prevent exorbitant penalties, which can be levied if income is later discovered by IT assessors. This way the Government is giving defaulters a chance to come clean by way of paying applicable penalties . It will eventually enable the government to generate more revenue, which can be utilized for public welfare functions and for the betterment of the Indian economy.
The amount deposited in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 can be utilized for several welfare purposes such as health, infrastructure, irrigation etc.
The declarant (i.e. individual, company or entity) must provide satisfactory explanation to the IT officer about his source of income/assets/cash received. In the present context, the definition of satisfactory explanation is not defined and there is a need to issue guidelines/instructions on the same. Also, the powers of tax authorities have to be clearly defined as it would help in conducting investigations and in getting effective results.
Presently, these amendments are not granting any exemptions/deductions or exceptions in its new disclosure rules. It is quite a drawback for taxpayers who are honest and can explain their source of income received. In consideration to previous announcements in wake of demonetization that there would be no investigations on any deposits upto Rs.2.5 Lakhs in bank accounts has not been properly proposed and is a matter of concern. In the proposed amendments, the Government could have made exemptions to amount deposited under Rs.2.5 lakhs. It would have eased the fears of common and honest taxpayers.
Provisions with regard to taxation/penalty on inexplicable income, cash, credit, investment or any other assets
Current Provision:
Proposed amendments in the said provision:
Pradhan Mantri Garib Kalyan Yojana, 2016: A new taxation and investment
scheme recently introduced provides that any undisclosed income can be declared via cash/bank deposit will also be taxed at the following rates:
Deposit: Such declared income can also be deposited up to 25% only in an
In order to deal with the danger of black money after demonetization, the legislative amendments in income tax Laws are considered to have significant implications on the economy. The introduction of severe penal laws is a right move but it needs careful implementation so that its effects can be comprehensively assessed. The authoritative power of Income Tax authorities has to be outlined; the contribution of honest tax payers has to be recognised and prevent any kind of menace from black money disclosures must be considered in order to issue rules, clarifications, guidelines or forms pertaining to disclosures and to execute the proposed amendments.
Copyright 2024 – Helpline Law
