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The downside of demonetisation: Some fearing the ‘unwarranted’ crackdown

Fresh guidelines introduced post November 8 announcement have made some fearful of the tax officials.

Written by Sandeep Singh | New Delhi | Updated: December 8, 2016 4:31:08 am
demonetisation, demonetisation debates, demonetisation effect, black money, Rs 500 Rs 1000 ban, narendra modi black money, modi, currency demonetisation, india news, indian express news Chartered accountants (CA) say that the only way to do it is by going through all the accounts which have witnessed a deposit of Rs 50,000 or more and investigating them.

With almost Rs 11.55 lakh crore already back in the banking system in the form of old Rs 500 and Rs 1,000 notes and government hinting it will trace all accounts where the black money may have been diverted, there are fears in the market that this will enhance the discretionary powers of taxmen and may lead to harassment of account holders.

As more than expected money has already returned into the banking system (with more than three weeks still to go for deposits), the government seems to have shifted its stance. Following the demonetisation move, the government said that account holders can deposit up to Rs 2.5 lakh in their account without any fear and action would be taken only against account holders where cash deposits are more than the threshold of Rs 2.5 lakh, if that does not match their returns. However, in a deviation from that stand, on Tuesday, a senior finance ministry official said, “No black money hoarder will be spared. If someone has deposited Rs 50,000 in the accounts of 500 people each, he will also be caught.”

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Chartered accountants (CA) say that the only way to do it is by going through all the accounts which have witnessed a deposit of Rs 50,000 or more and investigating them. “It will burden tax officials with a lot of work as they will have to do some filtering of sorts and then investigate all the accounts where the deposit is not in line with the tax returns filed by the individual,” said a Mumbai-based CA who did not wish to be named.


Even on gold holdings, the government’s announcement that married women, unmarried women and men can hold up to 500 grams, 250 grams and 100 grams respectively of undeclared gold, has raised concerns that officials may exercise their discretion in certain cases where individuals may find it difficult to explain their ancestral or inherited gold. In fact, the government reiterated a CBDT circular dated May 11, 1994 which states that the tax officer conducting the search or seizure operation has the discretion to not seize gold jewellery higher than prescribed limits based on factors including “family customs and traditions”. This, many feel is not the best way to go forward.

A Delhi-based CA and financial planner who did not wish to be named said, “It may lead to a lot of harassment. Ideally the government should have asked people to disclose and then they could have come out with a logical solution. This may turnout to be more regressive than the Inspector Raj as during Inspector Raj the only people to get impacted were companies and corporates but this would even impact individuals in the middle class.”

Further, in a missive on December 4, the CBDT urged Jan Dhan account holders “not to consent to any kind of misuse” of their accounts, which would “expose them to the dangers of being held responsible for the tax evasion by unscrupulous elements”. The warning, which stated that undisclosed income so detected will be brought to tax as per the provisions of the Income Tax Act, 1961, included instances of investigation being conducted by the I-T Department across India into the surge in cash deposits in Jan Dhan accounts, which, it said, had revealed various inconsistencies. These include undisclosed money of approximately Rs1.64 crore deposited by persons, who have never filed returns of income being below the taxable limits, into their Jan Dhan accounts detected at Kolkata, Midnapore, Ara(Bihar), Kochi and Varanasi and Rs 40 Lakh being seized from one such account in Bihar.

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