Two days after declaring war on black money through demonetisation, Finance Minister Arun Jaitley on Thursday assured that all small depositors, who approach banks or post offices to exchange their existing Rs500 and Rs1,000 notes, will not be hounded by taxmen, nor will they face any questions or harassment of any kind. At the same time, he also warned that those depositing large amounts of unaccounted money would have to face action under tax laws and a 200 per cent penalty for the same.
Revenue Secretary Hasmukh Adhia had said on Wednesday that only cash deposits of over Rs2.5 lakh in bank accounts will be scrutinised by the Income Tax Department and in case of mismatch with I-T returns, tax, plus 200 per cent penalty would be levied.
Assuring the people of the country, Finance Minister Arun Jaitley said, “With regard to people making small deposits, nobody will face any questions or harassment of any kind. People who have small amounts of cash at home for exigencies and emergencies, they can deposit that into their account. And the revenue department is not going to take notice of small depositors.”
Advising people not to throng banks as there was enough time to exchange the junked notes, he, however, told reporters at the Economic Editors’ conference that those depositing large amounts of unaccounted money will have to face the consequences under tax laws, which provide for tax and a 200 per cent penalty. “Deposits within the tax exempted limit can always be made within the banking system without any questions being asked. It’s only people with large amounts of undisclosed monies who will have to face the consequences under the tax laws,” Jaitley said.
On whether the demonetisation will help weed out black money, Jaitley said this is not an isolated initiative and the decision has to be seen in the backdrop of various steps being taken, including Goods and Services Tax (GST) rollout. “You will have the currency squeeze that will take place because a lot of static currency is not going to come back into the market. You have the GST which will be implemented, which is a far more effective system where tax evasion will be much lower and compliance will be much higher. You have parallel movement to rationalise your direct tax rate,” he said.