Income tax department moves that preceded demonetisation

The sudden demonetisation announcement has come as a jolt to many. But a peek into the past tells us that the income tax department has been meticulously planning its steps. It didn’t grow tentacles overnight, but has been slowly putting measures in place to curb tax evasion. Coaxing people to bring their taxes in order. Asking for asset declarations. Making this demonetisation exercise a carefully planned master stroke.

Consider the timeline of events that have preceded demonetisation-

March 2015 – Undisclosed foreign income and assets bill – A new scheme that urged resident taxpayers with foreign assets/incomes to disclose them and pay penalty if these were not reported earlier. The penalties under this new act were steep (tax rate of 30% and penalty of 90%).

July 2015 – Bank account disclosure in tax return forms – A new disclosure was added in return forms for bank accounts details of taxpayers. It asked for bank account number, IFSC code for all your bank accounts.

July 2015 – Reporting of foreign assets and income – Via this change the tax department made it compulsory for resident individuals with foreign accounts, foreign assets and income, to submit details of their holdings while filing their income tax return.

November 2015 – Non-filers monitoring system – The income tax department launched a non-filers monitoring system, where it tracked down non-filers via AIR filed by banks, through CIB (centralised information branch) or through TDS statements. Anyone, who it thought could have earned more than Rs 2.5lakhs based on their investments, expenses, savings or purchases was urged to file a return.

February 2016 – Income declaration scheme – The tax department opened an income declaration scheme from 1st June 2016 to 30th September 2016 asking people to declare their unaccounted incomes and assets. This scheme promised no scrutiny or enquiry for these declarations. And levied a total tax of 45% on such income.

April 2016 – Introduction of assets and liabilities schedule in tax returns – The tax department introduced a new schedule in tax returns called Schedule AL or assets and liabilities schedule. Here taxpayers were asked to disclose details of their assets at the price it was acquired by them. This was only applicable to those with annual income in excess of Rs 50lakhs.

May 2016 – Taxpayers asked to verify old tax returns – As a last and final chance to taxpayers, the income tax department allowed delayed verification of returns submitted for FY 2008-2009 till FY 2013-14. A first from the tax department, that allowed such old returns to be verified and brought in order.

July 2016 – Issue of letters seeking details of high value transactions – The income tax department unearthed 90lakh transactions made between 2009-10 to 2016-17 of high value such as; cash deposits of Rs 10lakhs or more in a savings bank account, sale/purchase of immovable property valued at Rs 30lakhs or more, and other similar transactions. Taxpayers were sent letters to explain these.

November 2016 – Benami Act comes into force – The government brought changes in the benami act of 1988 and made it applicable from 1st November 2016. It is now a powerful act under which benami assets can be confiscated.


Each one of these moves have revealed that this government is very serious about unaccounted money and income. Perhaps, it will leave no stone unturned to bring people in the tax fold and force them to pay up their tax dues.


A slightly modified version of this article was published on Financial Express here on 28th November 2016.

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