The recent demonetisation of Rs500 and Rs1,000 notes by the government, and the consequent action of depositing such notes in bank accounts, has raised various issues as to the tax treatment of such deposits. There has been much debate as to whether the tax authorities would enquire into all such deposits, how would these be treated, whether penalty would be leviable, and others.
While the government has clarified and issued an advertisement stating that details of deposits of up to Rs2.5 lakh would not be shared with the tax department, one needs to keep in mind that this is not a blanket amnesty. It only means that people would not be receiving notices from the tax authorities only on account of the fact that they have deposited cash in their bank accounts up to Rs2.5 lakh.
