ban on currency rs 500 1,000 1000 note modi rbi demonetization black money scrapped new notes 2000 new 500 coins legal tender rbi sit narendra
A customer deposits Rs 1,000 and Rs 500 notes in a cash deposit machine at bank in Mumbai, November 8 2016.Reuters

The Union Cabinet late on Thursday approved a proposal to make changes in the Income Tax Act to levy 60 percent tax on unaccounted bank deposits above a particular threshold limit. The latest move follows the government's decision to ban old higher currency notes of Rs 500 and Rs 1,000. 

The decision led to a sudden increase in cash deposits after the demonetisation move was announced on November 8. Jan Dhanaccounts have been reported to have witnessed about Rs 20,000 crore being deposited so far. The amount is equivalent to 50 percent of the total deposits in these accounts in the last two years since its launch, Business Standard reported.

Levying the heavy tax would help prevent black money holders from avoiding existing income tax act provisions. This means the government will be able to tax all the unaccounted money being deposited in the bank accounts. 

Sources told the Press Trust of India that the government plans to introduce changes to the Income Tax Act during the winter session of parliament to levy a tax, which would be higher than 45 percent.

The government may also discuss imposing a limit on hoarding gold but it is not clear if the proposal would be discussed at the Cabinet meeting to be chaired by Prime Minister Narendra Modi on Friday. 

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