Cabinet decides to 60% income tax to catch black money holders

The Union Cabinet late on Thursday cleared a proposal to amend the Income Tax (I.T.) Act to levy close to 60% deduction on unaccounted deposits in banks above a threshold, said sources.

The decision was purportedly prompted by a surge in deposits about 20,000 crore, according to some reports in Jan Dhan accounts since November 8, when the central government announced the demonetisation of Rs 500 and Rs 1,000 currency notes. The amount deposited in this period is almost 50% of the total deposits in these accounts in the two years since their launch. The move is also aimed at preventing black money holders from circumventing existing I.T. Act provisions.

The Cabinet decision was called in the late evening.

Its reported decision was also significant since the current provision of 30% tax and 200% penalty could be circumvented by those who may deposit black money but pay tax in advance.

In that case, imposing a penalty could become a vexed issue under the current I.T. Act.

There was no official briefing on what transpired in the meeting as Parliament was in session.

However, sources said the government was keen to tax all unaccounted money deposited in bank accounts in denominations of old currency notes from November 10.

Earlier, officials said a 30-per cent tax plus a 200-per cent penalty on top of a possible prosecution in cases where black money holders took advantage of the 50-day window.

This means a 90-per cent tax on black money holders.

However, there was a chance in this as black money holders can pay advance tax on their deposits and file it in their returns. In that case, penalty could not be levied in the strict sense as it was for misreported or underreported income.

Sources said the government plans to bring an amendment to the Income Tax Act during the current winter session of Parliament.

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