Do you have unexplained cash in your bank account? You will have to pay up to 83% income tax

The IT department will collect a heavy tax from you if it knows that you made a big unexplained cash credit in your bank account in the previous year.

Section 69A of Income Tax Act reveals that if you are found to have possessed any money and valuable articles including gold and jewellery in the previous year without any recorded of them and you either don’t offer any explanation about the nature and source of such acquisition or if the Assessing Officer is not satisfied by your explanation, then the money and the valuables may be deemed to be the income of the taxpayer for such year.

According to the rules you will have to give a high income tax at the rate of 83.25% (60% tax + 25% surcharge+ 6% penalty) if you own such unexplained cash or valuables. However, you will be exempted from paying the 6% penalty if the cash credit has already been included in return of income and tax has been paid on or before the end of relevant previous year.

This apart, you will also have to pay heavy tax at the rate of 83.25% (60% tax + 25% surcharge+ 6% penalty) for the ‘unexplained cash credit’. The ‘unexplained cash credit’ means that any cash credited in the books of the taxpayer, for which he offers no explanation about the nature and source or the income tax authorities are not satisfied by the explanation offered by the taxpayer.

Many taxpayers made huge cash deposits in their bank accounts due to demonetisation in 2017, during which the Government had banned the currency notes of Rs 500 and Rs 1,000. However, such taxpayers had come under the scrutiny of the Income Tax Department.

Later, the IT Department had offered a deal to the taxpayers to settle the litigation by paying their taxes on such undisclosed incomes without any further questioning on such undisclosed incomes.