How you can prove source of cash deposits to escape income tax scrutiny
- If you are unable to explain such cash deposits, you may have to pay income tax as well as penalty
- Some taxpayers seek to prove the source as being gifts or loans received by them from family or friends
Sachin Bansal-backed Navi Finserv to offer personal loa
In the recent ongoing scrutiny assessments for financial year 2016-17, one of the main items of verification, particularly in cases of individual taxpayers, has been that of the source of cash deposited by taxpayers in their bank accounts. The rationale for this is the fact that large cash deposits were made during the year by many taxpayers at the time of demonetization.
What is the implication if one is not able to explain such cash deposits? Tax is leviable on such deposits at 60% (plus surcharge and cess), along with interest at 12% per annum from ). Besides, a penalty can be levied at 200% of the amount of tax. Effectively, therefore, a taxpayer ount of deposit by way of taxes and penalty, besides applicable surcharge and cess. Not only that, if the amount is large, the taxpayer faces a potential prosecution as well, with a potential for rigorous imprisonment from three months to seven years, as well as a fine. A stiff punishment indeed for tax evaders.
Is it safe to invest in ELSS for tax saving even when m .
If one has deposited cash, how does one prove the source of the cash? Some taxpayers seek to prove the source as being gifts or loans received by them from family or friends, some may claim it to be deposited out of income, out of earlier cash withdrawals or cash in hand at the beginning of the year.
In cases of gifts or loans, one has to prove three things in relation to such explanation-the identity of the payer, the capacity of the payer to pay such amount and the genuineness of the transaction. One normally obtains a confirmation from the donor or lender, confirming the gift or loan, which proves the fact of the gift or loan. (more…)