Tax Professionals Welcome Move to Ban Rs 500-1,000 Bank Notes

(As Published in the Economic Times on November 8, 2016)
Tax professionals have welcomed the move by the Modi government to ban the Rs 500 and Rs 1000 notes with immediate effect. “It is a drastic but positive step that will help stamp out the menace of black money,” says tax and investment expert Balwant Jain. Jain says if you have Rs 500 and Rs 1,000 notes lying with you, there is no reason to panic if you can explain the source of the cash.
Sudhir Kaushik, co-counder and CFO of tax filing portal Taxspanner.com says those with unaccounted wealth have very few options before them. “The Income Declaration Scheme 2016 ended on 30 September. They could have utilized that opportunity to pay 45% and get into the safe zone. Now they wont be able to do anything,” he says. He points out that the Prime Minister had repeatedly warned people to come clean under the scheme and exhorted them to pay tax.
Jain expects a sharp rise in demand for physical gold and jewellery as panic stricken people with black money try to convert their unaccounted wealth into gold.
The other option before them is to declare the wealth now and pay up to 60% tax (30% income tax and minimum 100% of that as penalty). “The downside is that under the IDS 2016, they would have paid only 45% tax and no questions asked. Now they will have to answer a lot of questions and pay a higher tax.
Even then, there is no immunity from prosecution,” says Kaushik.
The ban will also boost the use of plastic money, as cash will now become difficult to carry.