As the Notes of denominations of Rs 500 and Rs 1000 stand withdrawn from the market, everybody is rushing to the banks to deposit or exchange the notes. One common question that is being asked by everyone is that how much cash is safe to exchange or deposit?
Most of us would be having cash in hand in old currency denomination out of our hard earned and tax paid money only, so there should not be any need for panic, however, I would like to address the above question of how much cash would be safe to deposit little differently here.
Mr Jaitley, in a TV address announced that for cash deposits of upto Rs 2.5 lacs, banks would not be asking any query nor forwarding the information to Income Tax Office
- Above statement has largely been construed as if there is license with everyone to deposit cash upto Rs 2.5 lacs in bank in these 50 days and Income Tax Department would not ask any question
- To my mind this is not true and logic is not very hard to understand. Therefore, I will like to request every one not to take above statement verbatim but to understand the consequences of depositing any cash in bank whatever be value
- So the Question is How much Cash is safe to be deposited in Bank?
- One point is What ever Actual Cash you have, if you have reason to explain, is safe to be deposited, No upper limit, repeat- if you have reasoning to explain
- Now argument against taking limit of Rs 2.5 lacs as safe. See, What Jaitley has said that Banks will not submit AIR to bank AND NOT that Income Tax Officer does not reserve the right to ask any query
- There is no change in Income Tax Act and the Income Tax Officer, reserves the right to ask source for any amount of cash, May be even if Rs 2500 is deposited
- Therefore for depositing cash in bank do a simple maths, as below, and check out the cash that you may safely
- Add up the cash withdrawn from banks during last six months- Say A
- Add up any cash received from sale of old assets, such as sale of old card etc- say B
- Add up any shoguns or gifts received from relatives during the period for any occasions. Remember gifts are exempt without any limit from specified relatives only, otherwise the same would be taxed beyond Rs 50000. It would be good if you make list of such relatives and amounts, say C
- Every one generally keeps some amount as safe cash to meet any contingencies at home. No ball park figure can be specified on this head as it varies from person to person depending on his income status, domestic compulsions etc. Example, a person having an ailing person at home may need to keep say Rs 1 lac any time at home to meet contingencies while others may feel Rs 50000 is enough, so for the moment lets assume a figure of Rs 1 lac here, say D
- Add up the payments to be made by you for any domestic expenses as tuition fees, mobile bills etc, say E
- Add up any costs of assets purchased in cash during this period, as TV, AC etc, say F
- Cost of celebrating a special occasions as marriage in the family, etc, for expenses paid in cash, say G
- Other expenses not listed above say H
- Now work out the amount of justified cash in hand as A+B+C+D-E-F-G-H= Net Amount
- If such net amount comes to any figure even if in excess of Rs 2.50 lacs, it may be safe.
- Alternately, if suc amount is much lesser than Rs 2.50 lacs, it may not be safe to deposit in bank. Assuming such figure comes to Rs 1 lac, please think twice to deposit any amunt exceeding Rs 125000, just taking liberty with Rs 25000.
- Consult your CA if you need any assistance
- Alternately you may chat with us online on the Chat link given below on any day