PremiumIf you have done a high-value transaction, it is unlikely that the same may go unnoticed by the tax department. Several entities, including banks, mutual funds, brokers, property registrar send information on high-value transactions to the tax department. The tax department may send you a notice if the transaction is not in line with the income that you have mentioned in your income tax return (ITR).
If you are unable to explain the source of income of cash in hand or in bank account, the assessing officer may charge a hefty penalty of up to 84%. The income will not only be taxed at a higher rate but a surcharge of 25% on the tax will also be charged. Plus, there may be additional penalty of 6% which may be imposed by the assessing officer.
“The unexplained income may be detected by the assessing officer or assessee can suo-motu offer it to tax in the Income-tax return. In both situations, the unexplained income shall be taxable at special rate as provided in Section 115BBE. In other words, the provisions of Section 115BBE shall be applicable if the unexplained income is shown in the ITR of the taxpayer or if the assessing officer detects such income," said Tarun Kumar, a Delhi-based charted accountant.
The rate of tax on such income will be 60%, while a surcharge of 25% will be charged on the tax that is 25% of 60% which will be equal to 15%. A cess of 4% will be charged on the same. This will bring the total tax rate to 78% (60% +15%+ 3%). Over and above this 78%, the assessing officer may charge a 6% penalty which will bring the total tax liability to 84%.
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