The Income Tax Department maintains a vigilant watch over financial activities, utilizing various data sources to ensure tax compliance. Specific transactions can trigger additional scrutiny, especially high-value cash transactions, real estate transactions and high-value credit card repayments.
For instance, if an individual’s savings account receives a cash deposit exceeding Rs 10 lakh in a fiscal year, it may prompt a notice from the tax department, seeking clarification on the source of these funds.
Central Board of Direct Taxes ( CBDT ) regulations mandate banks to report any instances where an individual deposits Rs 10 lakh or more in a financial year across one or more time deposit accounts, excluding renewals.
This reporting requirement extends to cooperative banks as well, encompassing cash deposits of Rs 10 lakh or more across individual accounts, except for current accounts and time deposits.
Moreover, financial institutions and entities issuing bonds or debentures must report receiving Rs 10 lakh or more from an individual in a financial year for acquiring such securities.
Cash Deposits and Withdrawals: Deposits exceeding Rs 10 lakh for savings accounts and Rs 50 lakh for current accounts, along with substantial withdrawals, may trigger inquiries regarding the origin and purpose of the funds.
Real Estate Transactions: Deals surpassing Rs 30 lakh in real estate transactions could invite scrutiny, with the tax department seeking detailed information about the transaction and parties involved.
Investments in Securities: Investments exceeding Rs 10 lakh in stocks, mutual funds, or bonds might face scrutiny if the source of funds is ambiguous or inconsistent with reported income.
Credit Card Transactions: Although individual credit card transactions are not actively monitored, cash payments exceeding Rs 1 lakh or significant debt settlements exceeding Rs 10 lakh made in cash could undergo scrutiny and investigation.
Foreign Exchange Transactions: Purchases of foreign exchange aggregating to Rs 10 lakh or more, including travelers’ cheques, forex cards, or debit/credit cards, need to be reported to ensure transparency in financial dealings.
Mismatch of declared income with data from banks may also trigger a notification. These measures are in place to monitor large cash movements, which can indicate potential concerns like hidden income, tax evasion, or black money.
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