Subscribe to PRO at just Rs.33 per month. Use code SUPERPRO
Last Updated : Jan 06, 2017 05:57 PM IST | Source: Moneycontrol.com

Co-operative bank deposits and taxation

The time when the fixed deposit was made with the cooperative bank is a very important.

Arnav Pandya

The attention of tax officials has now shifted to deposits made in cooperative banks because there is a feeling that a lot of black money could have been deposited here. There would be several investors who would have made genuine deposits with these banks and they would be worried about being caught up in the search and inquiries that would be made. There is no need for the genuine investors to worry as they can prepare by keeping various details ready so that in case it is required they are able to give the necessary explanation to the tax officials. Here is a look at how this process can be completed.

Time of deposit

The time when the fixed deposit was made with the cooperative bank is a very important consideration because if this was made just around the time of demonetisation then it is likely that there could be questions raised about it. There are reports that due to lack of foolproof measures there are likely to have been several cases of backdating of fixed deposits. One of the ways for the investor to actually ensure that there is a proper answer is to go back and look at the flow of funds that has gone to the deposit. If this amount was already present in the bank account and lying there then it can be shown conclusively where the money for the deposit actually came from. This kind of match of the flow of funds is essential so that there is a proper explanation given when asked for.

Cash deposit

It could also be that there is a cash deposit that has been made in old notes and then the amount has been converted into a fixed deposit. This will again lead to the look at the time when the entire action was completed. The amount of the cash deposit and the place from where this came would need to be explained in case this is asked for. The quantum of the cash deposit would play an important role because if the amount is small then it could have been just the amount that has been lying at home with the family or the person and this has been deposited in the bank account. On the other hand if the amount is huge and there is no proper explanation for this then it would lead to further action by the tax officials.

Tax returns

The whole process raises the importance of the tax returns because the figure that has been shown as income would be crucial in determining the importance of the cash as well as fixed deposits that have been made. In the tax returns there is a clear space for mentioning the different types of tax free income including agriculture income in the tax returns so one would be able show the extent of the amount that has been earned and shown in the returns going back. This would act as the supporting framework for the deposit made.


There can also be a situation wherein the individual had cash on hand including amounts that had been withdrawn and in such a situation the deposit could just be the same amount that is being put back in to the bank account. Again this would require prior records which show that the transactions have actually taken place and hence it would act as a proof of the reason why the person has taken the necessary steps. With the high value currency becoming non legal tender there has been no choice for many people but to actually ensure that they go and put the money back into their accounts.
First Published on Jan 6, 2017 05:57 pm