Tax avoidance is not a crime. Tax evasion is a crime.
Yes….the citizens of our country love to escape paying their taxes. Evading taxes is the only meaningful pursuit in life, for several of our citizens. The Government has decided to put an end to tax evasion, by the citizens of our country. The Government scrapped 500 and 1000 rupee notes, effective midnight, November 8th 2016. The Government asked citizens to deposit their old 500 and 1000 rupee notes at banks, between November 10th 2016 to December 30th 2016. According to rules, you have to give PAN details, if you deposit cash of more than INR 50,000.
What are the clever citizens of our country doing? They are making multiple cash deposits, of amounts less than INR 50,000, so that they can escape giving PAN details. Now the Government says…All cash deposits made between 9th November 2016 and December 30th 2016, will require you to give PAN details, if the combined sum (amount of deposits), exceed INR 2.5 Lakhs. Now there is no escape, even if you make multiple deposits less than INR 50,000. You have to show your PAN details at the bank and then the income tax department collects them.
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The Finance Minister Arun Jaitley explains how income tax returns are scrutinized
The honorable Finance Minister, Arun Jaitley says….Just 4-4.5 crore people file income tax returns, out of 125 crore people in India. The Finance Minister says…fear of scrutiny by income tax authorities, cannot be used as an excuse, for not paying your taxes. A person who doesn’t pay his taxes cannot say…paying tax would invite further headaches.
How does the tax scrutiny process work? Citizens of our country file income tax returns (ITR). These returns are fed directly into a centralized computer system. There is no human interference in the entire process. The computer issues a warning (red alert), for certain suspect cases. These cases are picked up further scrutiny.
Only 1% of the total income tax returns filed, are picked up for scrutiny. Out of 4-4.5 crore citizens who file income tax returns, just 3.5 lakh citizens who file returns are picked up for scrutiny, each year.
You must be wondering how the computer system identifies suspect cases and issues a warning.
Only 4-4.5 crore citizens, file income tax returns each year, out of nearly 125 crore citizens. Demonetization (scrapping of old 500 and 1000 rupee notes), will help crack down on black money and force citizens not paying taxes to clear their dues.
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Finally….This is your last chance to declare black money
Declaring black money just got simple….Deposit your old 500 and 1000 rupee notes at the bank. Then simply avail the benefits of Pradhan Mantri Garib Kalyan Yojana, 2016. You pay a tax of 30% on your undisclosed income + penalty of 10% on this undisclosed income + surcharge called Pradhan Mantri Garib Kalyan Cess of 33% on the tax (33% of 30% tax). All this adds up to around 50% in tax.
Then, 25% of the undisclosed income which you declare, will have to be mandatorily deposited in Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. You earn nothing on this deposit and your money is locked for 4 years. This scheme will last till December 30th 2016. This could be your last opportunity to declare black money. So grab it with both hands…
Remember: If the tax department catches your black money, it imposes a stiff penalty of up to 85% of undisclosed income. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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