No need to panic on cash deposit of old notes : I.T dept is not going to chase every deposit.

Housewives, farmers and those whose annual income is within the tax exemption limit may not be hounded by tax authorities for depositing up to Rs.2.5 lakh of the now-defunct higher denomination currency notes in bank accounts, a top government official said today.
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After withdrawing Rs500 and Rs1,000 notes from circulation, the government allowed individuals to deposit the same in their bank accounts till 30 December and get smaller denomination ones or new Rs500 and Rs2,000 bank notes.

These deposits, however, will be scrutinised to catch tax evaders and black money holders. But those falling within the income tax exemption bracket Rs2.5 lakh need not worry regarding their cash deposits in banks except for suspicious cases, the official said.

In a surprise move, Prime Minister Narendra Modi last night announced demonetisation of Rs1,000 and Rs500 notes with effect from today to fight the menace of black money, fake currency, corruption and terror financing.

“Housewives can deposit up to Rs 2.5 lakh and pay no tax. There could be problem if one goes to deposit Rs20 lakh,” the official said.

“Tax officials are not going to go after those who deposit Rs2-3 lakh, but those who are going for high-value deposits, disclosures will be sought by the tax department.”

Listing three major positives of the government’s move, the official said over medium to long term, it will help increase official size of the economy, improve tax collection and provide more resources to banks for onward lending.

“It will have an impact on inflation as well as tax buoyancy. Cash for lending will also increase. Mid-term both direct and indirect taxes will go up,” he said. “Official size of the economy will increase dismissing fears of cash crunch. Instead of spending cash, you can spend through bank account, cheque, or electronic means... For smooth replacement, cash for cash will be rationed because if you allow an indefinite amount, there could be a run-on the banks.”

According to a source, the entire replacement currency will be there over the next 3-4 weeks. On the rationale of introducing new Rs2,000 notes, the source said since 86%of the high-value currency was lying idle, there was a need to replace the old with the new.

Source : PTI