Recently, Government introduced Demonetization whereby currency notes of Rs. 500 and Rs. 1000/- have been declared as invalid legal tender with effect from 9.11.2016 is most likely to witness huge cash deposits in bank accounts within the window period expiring on 30.12.2016. Media reports have appeared attributed to Government sources that in case substantial amount of cash is deposited in banks declaring it as current year’s unaccounted income and applicable tax @ 30% plus surcharge etc. is paid, still penalty @ 200% of the tax can be imposed as per provisions of section 270A of the Income Tax Act, 1961.
When any person deposits some cash amount in his bank account and it is established that such deposit is an unaccounted money (black money), then the entire deposit shall be charged to tax without providing the benefit of slab rates. The impart of Tax on unaccounted money are as under :
Unaccounted Money Rs. 10,00,000/-
Tax on Income at 30% = 3,00,000
Add: Surcharge at 12% = NIL
Add: Education cess at 3% = 9,000
Total Tax = 3,09,000
Penalty at the rate of 200% = 6,18,000
Total Tax and Penalty = 9,27,000
Benefit Amount = 73,000
Interest u/sec. 234B and 234C will also be charged and after that one may end up paying more than the amount deposited in the bank account.
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