The government is likely to add a new amendment to the Income Tax Act in the wake of the scrapping of Rs 500 and Rs 1,000 notes currency notes that was done after November 8. This amendment has been sent to the president for his assent and will be proposed in Parliament next week. Upon implementation, it will allow taking legal actions for those people who have made unaccounted cash deposits of such currency notes. Further, as per the new amendment, those who voluntarily deposit unaccounted cash in banks will face a tax of 50% (30% tax+20% penalty). The remaining 50% of such deposit will be distributed in two parts (25% each); the first 25% will face 4-year lock-in time with zero interest while the other 25% will be allowed for use.
A total levy of 90% tax (30% tax plus a penalty of about 60%) will be imposed beside prosecution, if any kind of black money is detected by authorities of the income-tax or if anyone doesn’t declare their unaccounted cash willingly. Further, those who willingly deposit this money in banks might not face any prosecution. Also, such people who make this cash deposit above a certain threshold, taking the help of scrapped Rs 500 and Rs 1,000 notes may attract a 50% levy (30% tax and 20% penalty) in accordance with the amendment to the Income Tax Act.
This amendment is prepared for the IT Act after a warning of strict action was sought by the Ministry of Finance against tax evaders that were using the bank accounts of other people in order to convert their black money into white. Also, any person who is helping route for conversion of such money into new denomination notes by allow their bank accounts to be used will not be spared.