RBI OBSERVATION ON HIGH CASH WITH PUBLICI
Different Agencies are guessing the reasons for decline in the Bank Deposit and High Cash held by the Public during the last two months. Some analysts are attributing it to the elections in the four states, whereas as some feel that it is in anticipation of demonetization of currency notes of 500 and 1000.
The decline in the bank deposit and higher cash with the public can also be attributed to the increased surveillance by the Income Tax Department under the NDA Government resulting in unaccounted money being withdrawn from the Banking System.
The banks were earlier deducting tax at source from the interest income earned (in excess of INR 10000/- in a year) from fixed deposit by consolidating the deposits held in one branch of the bank. However, the practice was changed and the interest earned on all fixed deposits held under a Single PAN no in a single bank was consolidated and tax was deducted at source.
Some individuals in higher tax bracket (20% or 30%) were neither declaring their interest income from FDs in their returns not claiming the credit of 10% tax deducted at source and thereby getting away by paying only 10% income tax on such income.
The tax deduction at source created an audit trail and the interest paid to an individual was reflected in the AS 26 Statement. Further, computerization of the income tax returns and development of software to match the interest income declared in the return with the interest income appearing in AS 26 lead to electronic analysis of the IT returns. Similarly, where the person with interest income above INR 10000 a year has not filed any return were also identified through such analysis.
The income tax Department during the last three months have issued notice to the entities where there a mismatch between the AS 26 statement and the income returned or returned not filed. The income tax Department has sought the reason for discrepancy or for not filing the returns and have asked the entities to either file their returns or revise their returns. Where income tax return has not been filed the Department has also asked the individuals to declare the source of their income. Such notices have been issued for the FY 2013-14 and 2014-15 and individuals have been directed to file their returns or revised returns before 31/03/2016.
This automation coupled with increased surveillance by the income tax department has made it difficult to park unaccounted money in Bank FDs or escape tax on the interest income earned from bank fixed deposits. This could also be one reason for flight of the unaccounted money from the banking system. more
The decline in the bank deposit and higher cash with the public can also be attributed to the increased surveillance by the Income Tax Department under the NDA Government resulting in unaccounted money being withdrawn from the Banking System.
The banks were earlier deducting tax at source from the interest income earned (in excess of INR 10000/- in a year) from fixed deposit by consolidating the deposits held in one branch of the bank. However, the practice was changed and the interest earned on all fixed deposits held under a Single PAN no in a single bank was consolidated and tax was deducted at source.
Some individuals in higher tax bracket (20% or 30%) were neither declaring their interest income from FDs in their returns not claiming the credit of 10% tax deducted at source and thereby getting away by paying only 10% income tax on such income.
The tax deduction at source created an audit trail and the interest paid to an individual was reflected in the AS 26 Statement. Further, computerization of the income tax returns and development of software to match the interest income declared in the return with the interest income appearing in AS 26 lead to electronic analysis of the IT returns. Similarly, where the person with interest income above INR 10000 a year has not filed any return were also identified through such analysis.
The income tax Department during the last three months have issued notice to the entities where there a mismatch between the AS 26 statement and the income returned or returned not filed. The income tax Department has sought the reason for discrepancy or for not filing the returns and have asked the entities to either file their returns or revise their returns. Where income tax return has not been filed the Department has also asked the individuals to declare the source of their income. Such notices have been issued for the FY 2013-14 and 2014-15 and individuals have been directed to file their returns or revised returns before 31/03/2016.
This automation coupled with increased surveillance by the income tax department has made it difficult to park unaccounted money in Bank FDs or escape tax on the interest income earned from bank fixed deposits. This could also be one reason for flight of the unaccounted money from the banking system. more
Viewed by 13
Public interest at prompt carry of democracy reforming the fundamental Conduct & Candidature setting the requisite Regulations by E.C. if governed with an Ordinance making It inevitable to account and Audit of FUNDS OF POLITICAL PARTIES before the Elections was thought by many of our Participants . The delay is in deed a disgust . more
Apr 13
The unaccounted for money floating in the system, detected by the RBI, arisen from the state polls, should be immediately used for infrastructure building..else will hike up the existing inflation...RBI Needs to take urgent proactive steps to reassure faith of people in bank FDs...else people feel their hard earned money is going drown the drain to fund the nefarious activities of people like Mallya & Co. more
Apr 13
It may also be used as white money creating fake events and business transactions where this money take place . more
Apr 12
I am a great follower of this government. But this government is of the opinion that taxation is the solution for everything. Liberalization should not only be in the governance but it should be in taxation too. Look at the nations that have lower thresh hold of taxes. They have become highly successful, our nation requires dramatic and a drastic re look of our taxes and the system of implementation. This nation has huge cache of unaccounted money, huge that should be three times to four times the accounted tranche. By making laws stringent people will only loose their right to account money and the very hard earned money itself. Liberalize the tax system and see the dramatic transformation this nation will undergo. Transaction tax is the only solution for our nation from now on and not the income tax. We need atleast five decades for the whole nation to get education and literacy for us to understand the tax system. Like how we pay the service tax without even knowing about it, the transaction tax will get absorbed by people. This is the only way to make people spend freely and to bring into purpose the unaccounted money, else the nation will continue to be in chaos and the confrontation between the people and the government in as much as non compliance would continue. more
Apr 12
