1. Cash deposits of up to Rs 2.5 lakh will not invite any scrutiny even if the source is not disclosed
Finance Minister Arun Jaitley’s statement that cash deposits under Rs 2.5 lakh would not invite any scrutiny by the income tax department has led people to believe that they can freely deposit this amount without any repercussions. Ordinarily, this could hold true, particularly for homemakers, daily wage labourers and senior citizens who prefer to save in the form of cash to meet their regular or emergency expenses. However, this does not mean that everyone with unaccounted cash will get a blanket exemption.
Expert View: “The intention is to not trouble those people who ordinarily don’t have taxable income and keep their savings in cash. However, if any other person, be it a salaried individual, or a trader, professional or businessman deposits this much amount in his/her bank account, such a person can definitely be questioned if the deposits don’t match the disclosed income,” explains Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP, a tax consultancy firm.
If you draw a total income of over Rs 50 lakh, you need to be careful when you make cash deposits. All such taxpayers were required to disclose their networth in the asset-liabilities schedule (or schedule AL) while filing their tax returns this year. “Such tax-payers should be mindful of the cash in hand they may have disclosed in that schedule. If the difference is substantial and unexplained, it could give rise to queries from the income tax department,” says Vaibhav Sankla, director, H&R Block, a tax consulting firm. Conversely, all those who can explain their deposits need not fret. “Tax authorities can question where they find the deposits you make are disproportionately higher than the income declared by you or your spouse (in case of home-makers) over the years. As long as they can explain the source of income, small depositors need not panic,” says Kuldip Kumar, partner and leader, personal tax, PwCc,” says Kuldip Kumar, partner and leader, personal tax, PwC.