Did you make a big unexplained cash credit in your bank account in the previous year? You may have to pay a heavy tax on that amount if the IT department finds it. According to Section 69A of the Income Tax Act, if it turns out that you own any cash, gold, jewellery or any valuable article in the previous year that was not recorded in your books, you either don't offer any explanation as to the nature and origin of this acquisition or if the Assessing Officer is not satisfied by such explanation, the money and value of the bullion, jewellery, or other valuable items may be deemed to be the taxpayer income for such year.
This unjustified money attracts a high income tax rate of 83.25% (60% tax + 25% surcharge + 6% penalty). However, a 6% penalty will not apply if the cash credit has already been included in the return of income and tax has been paid at or before the end of the prior applicable year.
Apart from money, gold and other valuables, any cash credited in the taxpayer's books, for which no explanation is provided regarding its nature and source or the tax authorities are not satisfied with the explanation provided by the taxpayer, will also be taxed heavily at the rate mentioned above. This cash inflow is called an "unjustified cash credit" under Section 68 of the Income Tax Act.
After the demonisation in 2017, when the government banned the â‚¹500 and â‚¹1,000 banknotes overnight, many taxpayers made huge cash deposits into their bank accounts which came under scrutiny by the Income Tax Department. The IT department then offered a deal to taxpayers to settle the litigation by paying their taxes on such undisclosed incomes without further questioning on such undisclosed incomes.
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