Prepare to face the following penalties and prosecution if the Income Tax department finds out that you have black money i.e. unaccounted money.
If you deposit large sums of cash in your bank account the tax department is likely to send you a notice asking you to explain the source.
If you are unable to produce sufficient proof and convince the assessing officer (A.O) about the legitimacy of your cash then you are likely to face penalties and prosecution as per the Income Tax Act.
Here is a complete list of various penalties that can be imposed on you for different types of defaults made; prosecution proceedings which might be initiated against you (including imprisonment) and the provisions which can help you get immunity from same.
PENALTIES
1. Penalty under Section 270A ( Penalty for Under reporting and misreporting of income):
If during the assessment proceedings, it is found that you have under reported or misreported your income, then penalty under section 270A will be imposed on you. This is the harshest penalty that can be imposed by the department.
Quantum of penalty
The amount of penalty will be 50% of the tax payable on under reported income. In case the under reported income is a result of misreporting, then the penalty amount is increased to 200% of the tax payable on under reported income. In most of the cases the income tax department is going to be in favour of the higher rate (200%) for imposition of penalty.
Under reported income v/s Misreported income
It is necessary to know the cases where it will be said that you have under reported your income. If any of the following holds true in your case, then it will be deemed that you have under reported your income:
a) If your income assessed under section 143(3) (i.e. scrutiny assessment) is greater than the income declared by you in your Income Tax Return (ITR).
b) In case you have not filed your ITR, and the Assessing officer has assessed your income under section 144 (i.e. best judgment assessment) and the assessed income (income computed as per the A.O) is greater than the maximum amount not chargeable to tax as per the tax slab (i.e. Rs 250000 at present)
c) The reassessed income is higher than the income already assessed before.
It will be deemed that you have misreported your income if any of the following hold true:
* If you have misrepresented or suppressed any of the facts.
* If you have not recorded investments in the books of account.
* If you are not able to provide any evidence to substantiate any expenditure that you have claimed.
* If it is found that you have intentionally recorded any false entry in books of account.
Penalty under section 270A will replace the penalty imposed earlier (during assessment proceedings) under section 271 which amounted to a minimum 100% and a maximum of 300% of the tax sought to be evaded
2. Penalty under section 271A - Default in maintaining or retaining books of account
If during the assessment proceedings, it is found that you have not maintained any books of accounts or other document as required under section 44AA, or the A.O finds that you have not retained the books of accounts and other necessary documents for the minimum time period (which is 6 years), then a penalty of Rs 25000 will be imposed on you.
3. Penalty under section 271B- Default in Tax Audit
If during the assessment proceedings, it is found that you were supposed to get your accounts audited under section 44AB (Tax audit) but you haven't complied with the same, or in case you have failed to file the tax audit report under form 3CD, then a penalty under section 271B of the act will be imposed on you.
The amount of penalty will be a sum equal to 0.5% of gross sales, gross turnover or gross receipts, as the case may be, but in any case this penalty cannot exceed Rs 50000.
4. Penalty under section 271C - Default in deducting tax at source
If during the assessment proceedings, it is found that you have failed to deduct whole or any part of TDS as required by income tax laws, then the the penalty will be a sum equivalent to the amount of tax not deducted.
5. Penalty under section 271CA - Default in collecting tax at source
If during the assessment proceedings, it is found that you have failed to collect whole or any part of TCS as required by income tax laws, then a penalty of a sum equivalent to the amount of tax not collected will be imposed on you.
6. Penalty under section 271D - Accepting loans in cash
If during the assessment proceedings, it is found that you have accepted a loan or deposit from any other person in cash for a sum exceeding Rs 20000 in a financial year, then a sum equal to the amount of loan accepted will be demanded from you by way of penalty.
7. Penalty under section 271E - Repayment of loans in cash
If during the assessment proceedings, it is found that you have repaid any loan or deposit to any other person in cash for a sum exceeding Rs 20000 in a financial year, then a sum equal to the amount of loan repaid will be demanded from you by way of penalty.
8. Penalty under section 271F - Non filing of ITR
If during the assessment proceedings, it is found that you have not filed your ITR for a financial year by the end of the year following the financial year for which the ITR has to be furnished, then a penalty of Rs 5000 will be imposed on you.
9. Penalty under section 271H - Non filing of TDS return
If during the assessment proceedings, it is found that you have not furnished the TDS returns even after expiry of 1 year from the due date of filing such returns or have furnished any incorrect information in the TDS returns filed by you, then a penalty of a minimum Rs 10000 and a maximum of Rs 100000 will be imposed on you.
10. Penalty under section 272B - Not having PAN or providing incorrect PAN
If during the assessment proceedings, it is found that you have not applied for a PAN even though it was required as per the provisions of section 139A or where after obtaining a PAN, you have not intimated the same or provided incorrect PAN to any person under the provisions of the income tax act, then a penalty of Rs 10000 will be imposed on you.
11. Penalty under section 272BB and 273BBB - Not having TAN or providing incorrect TAN
If during the assessment proceedings, it is found that you have not applied for a Tax deduction account number or a tax collection account number as required by section 203A and section 206CA respectively, or in case where you have furnished incorrect TAN on the challans and certificates issued by you, then a penalty of Rs 10000 will be levied on you.
PROSECUTION
1. Prosecution under section 276C - Wilful attempt to evade tax, penalties etc.
If you try to evade the taxes, interest or penalties payable by you in any manner or you have under reported your income, then you are liable to l face prosecution proceedings under this section.
As a result of the prosecution proceedings, you might have to face imprisonment for a minimum of 6 months which may extend up to 7 years.
If the amount sought to be evaded (tax, interest, penalties) or the amount of under reported income is less than Rs25 lakh then the time period for imprisonment would range from 3 months to 2 years.
2. Prosecution under 276CC - Non filing of ITR
If it is found that you have deliberately not filed your ITR for a financial year till the end of the year following the financial year for which the ITR was supposed to be furnished, or in case you have not filed the Return that you were supposed to file in response to a notice received under section 142(1), 148 and 153A, then you might have to face prosecution proceedings under this section.
The tenure of imprisonment would depend upon the tax amount that would have been evaded by you had the failure not been detected.
If the tax amount that was sought to be evaded exceeds Rs 25 lakh then the tenure of rigorous imprisonment would be a minimum of 6 months to a maximum of 7 years. In other cases it would be minimum 3 months to a maximum of 2 years.
3. Prosecution under Section 276D - Non compliance with the notice received under section 142(1)
If you do not cooperate with the A.O and do not produce the documents and books of accounts that are demanded by him through a notice issued under section 142(1), or where you do not comply with the directions issued by the A.O under section 142(2A) for conducting your special audit, then it is quite likely that you would face prosecution proceedings under this section.
As a result of these proceedings, you might face imprisonment for up to 1 year.
Take Precaution While Going for Exchange of Old Notes
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Now that the legal tender character of the notes in denominations of Rs 500 and Rs 1,000 stands withdrawn, you must be getting ready to visit the bank to get the old currency lying at your home exchanged. While doing so, it's important that you keep a note of some things.
For exchanging old notes with new ones, the bank requires you to fill up a few details in a prescribed format and attach a photocopy of your valid identity proof.
Be cautious
While submitting the photocopy of your ID proof to the bank or the post office, make sure that you mention the fact that it's being submitted for the purpose of exchanging old notes, along with the date. Take this precautionary step to ensure that your ID details are not misused by anyone.
Valid ID proof
You will be required to carry a valid ID proof, which can be in the form of your Aadhaar card, driving license, voter ID card, passport, NREGA card, PAN card, any other ID card issued by the government. Keep a photocopy of your ID handy with you.
Requisition slip
You will also be required to fill up a 'requisition slip' as per the format specified by the Reserve Bank of India (RBI). A sample can be seen below:
55350744 Exchanging old notes
You need not visit the branch of the bank where you have an account in. If you want to exchange up to Rs 4,000 in cash, you can simply go to any bank with a valid ID proof. This limit of Rs 4,000 for exchanging old notes will be reviewed after 15 days.
If you are carrying more cash (old notes), you will get up to Rs 4,000 per person in cash (new notes), irrespective of the actual amount, and anything over and above that will be credited to your bank account.
If you can't visit the bank due to some reason, just send your representative with an express mandate, i.e., a written authorisation. The representative will be required to produce an authority letter, along with his valid ID proof while exchanging old notes.
If your relative or friend has an account, you can also get the old notes exchanged into that account, provided the third-party gives you the permission in writing. While exchanging notes, you should provide the bank with the evidence of permission given by the account holder, along with your valid ID proof.
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