Cash Deposit in Bank- Take care of Income Tax Provisions of India

By | November 10, 2016
(Last Updated On: November 10, 2016)

Cash Deposit in Bank- Take care of Income Tax Provisions of India

Cash Deposit in Bank- Take care of Income

As the Government has declared that currency notes of Rs. 500 and Rs. 1,000 denominations will not be valid from midnight of November 8, 2016, citizens will have to surrender the old notes at any branch of a bank or post office.

Citizens will have a time limit of 50 days (till 30 December, 2016) to either replace the old notes with new ones or deposit the same into their bank or post office accounts. The limit for exchanging the old notes with new ones is set at Rs. 4,000. However, there is no such limit for depositing the old notes into bank or post office account. In other words, a person can deposit the old notes into his bank or post office account without any limit.

Various provisions of Income-taxAct would play a vital role in achieving the objectives of this move to curb the black money as under:

1. Furnishing of PAN  while depositing cash in Bank

As per section 139A of the Income-tax Act, 1961 read with Rule 114B of the Income-tax Rules, 1962, PAN is mandatory if a person wants to deposit cash of more than Rs. 50,000 into his bank account during any one day. Hence, a person who doesn’t have PAN won’t be able to deposit cash of more than Rs. 50,000 into his account

2. Furnishing of information by Bank / Post office to Income-tax Department regarding Cash Deposit

As per section 285BA of the Income-tax Act, 1961, every bank or post office is required to furnish a statement of financial transaction or reportable account (commonly known as ‘Annual Information return’) to Income-tax department in respect of cash depositmade by a person aggregating to Rs. 10 lakh or more in a financial year, in his one or more accounts. The limit is Rs. 50 lakh in case of current account.

Hence, Banks or post offices pass information to income-tax department in respect of every person who deposited cash of more than Rs. 10 lakh in his accounts during a financial year.

Hence, it is quite possible that on basis of information received from banks or post offices, Income-tax department may furnish notices to persons depositing cash of more than Rs. 10 lakh to explain the source of such deposit.

3. Penalty for concealment or misreporting of income on failure to disclose source of Income from which Cash Deposited

As per section 271(1)(c) of the Income-tax Act, a taxpayers is penalized if he conceals or furnish inaccurate particulars of his income. The penalty under section 271(1)(c) ranges between 100% to 300% of the tax sought to be evaded.

Section 271(1)(c) was substituted by section 270A by Finance Act, 2016 which provides for the penalty in case of misreporting or under reporting of income. The penalty is 50% of the tax payable on under-reported income and 200% of the tax payable on misreported income.

Hence, if a person fails to disclose the source of the amount deposited in bank or post office account, he can be penalized under section 271(1)(C) or Section 270A, as the case may be.\

4. Unexplained Credit and Cash Deposit

Section 68 of the Income-tax Act, 1961  provides that where any sum is credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of that assessee. Read Cash deposits in saving bank account held as unexplained

5.  Cash Payments not Allowed

As per Section 40A(3) of income tax Act, Cash payments by businessmen not allowed exceeding Rs 20000 except as provided in Rule 6DD. Read More 40A(3) –Cash Payments not Allowed

6. No Repayment of Loan / Deposit or Advance in Cash Exceeding Rs 20000

Section 269T of Income Tax Act provides that any loan or deposit or specified advance shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the person specified in the said section, if the amount of such loan or deposit or specified advance is twenty thousand rupees or more. Read Post No repayment of Loans or deposits or advance in cash >Rs 20000

7. No Acceptance of loan or Deposits in Cash exceeding Rs 20000

Section 269SS of the income tax provided that  No person shall take or accept from any other person  any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if, aggregate amount exceeds Rs 20000. Read No Loan or Deposits or advances in cash >Rs 20000


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