If a person conducts high value cash transactions, it is quite possible that they will receive a notice from the income tax department. The various transactions related to cash include banks, mutual fund companies, brokerage houses, and real estate registries. Large value transactions should always be reported to the income tax office if the value exceeds a certain threshold. The Income Tax Department has made agreements with several government agencies to obtain the financial records of people who engage in high value transactions but do not report them on their tax returns.
Here are some examples of transactions for which you might receive a notice from the income tax department: –
Make FD bank deposits
Cash deposits at FD bank should not exceed 10 lakh INR. A bank depositor making a cash deposit to an FD bank account is advised not to exceed the cap of 10 lakh INR. The Central Commission on Direct Taxes (CBDT) has announced that banks must disclose whether individual deposits exceed the prescribed limit in one or more term deposits.
Make deposits to savings accounts
The cash deposit limit in a bank account is 10 lakh INR. If a savings account holder deposits more than 10 lakh INR in a fiscal year, the income tax department may serve an income tax notice.
During this time, deposits and withdrawals of cash to a bank account exceeding the limit of 10 lakh INR during a financial year must be disclosed to the tax authorities. In current accounts, the limit is INR 50 lakh.
Pay credit card bills
In accordance with the CBDT, payment of 1 lakh INR or more in cash against credit card bills must be reported. Additionally, if a payment of 10 lakh INR or more is paid in a fiscal year to settle credit card bills, the payment must be disclosed to the tax department. The main and crucial concern, however, is the income tax that applies to credit card transactions. You should check that you do not exceed your credit card spending limit as the tax authority keeps track of credit card transactions as your credit card details are linked to your PAN card and therefore can be easily monitored online by the government. Any significant transaction must be disclosed when filing the RTI. If you use credit cards for high value transactions, be sure to disclose them on Form 26AS when filing your ITR to avoid receiving an income tax notice.
Purchase or sale of a building
The property registrar must disclose any investment or sale of real estate in the amount of INR 30 lakh or more to the tax authorities. The property purchase / sale transaction must be reported on your Form # 26AS. If you buy or sell a property for more than INR 30 lakhs, you are also on the radar of the income tax department. The Income Tax Service can examine whether the buyer declared the income on their tax return
Stocks, mutual funds, debentures and cash bonds – transactions
Some people who invest in mutual funds, stocks, bonds or debentures need to ensure that their cash transaction in these investments exceeds INR 10 lakh. The IT department created an annual financial transaction information return (AIR) to track high value taxpayer transactions. Tax officials will collect on this basis details of unusual high value transactions during a particular fiscal year. If an expense or transaction was listed as a high value transaction, check the AIR section of your Form 26AS. PART -E of Form 26AS combines details of high value financial transactions.
Sale of currencies and foreign exchange expenses
An amount of INR 10 lakh or more in a financial year received by any individual for the sale of foreign currency, as well as any credit in that currency, through a debit card or credit card or traveler’s check insurance, drafts or other instruments, should be notified to the income tax department.
Author Amit Gupta is the Managing Director of SAG Infotech
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Article first published: Saturday, December 18, 2021, 7:55 a.m. [IST]