It is not just offline, but online transactions can also attract the lens of the Income Tax (I-T) department. Hence, banks and other financial institutions should notify the I-T department of transactions crossing a certain threshold. This includes all kinds of transactions and payments such as UPI, card, cash deposits, as well as withdrawals beyond a specific limit.
Mostly, the I-T department uses advanced data analytics to find the differences between reported income and incurred expenses. It can create a detailed financial profile of individuals by cross-checking information across various sources such as bank statements, property records, investment details, and travel records. Also, it can collate information from external sources such as travel agencies, stock exchanges, and employers to assess income sources and identify possible discrepancies.
Such as level of scrutiny is useful for suspected cases of tax evasion. It also allows the department to initiate scrutiny assessments, and issue conflicts, and conduct inquiries to collect evidence and recover taxes.
“I feel paying Rs 1 lakh plus in cash for credit card bills is something which a lot of people might be doing and this might attract IT department eyes on you,” Anant Ladha, founder, Invest Aaj For Kal, a financial advisory firm said.
Exceeding Rs 10 lakh in cash deposits or withdrawals from a savings bank account in a fiscal year. The Central Board of Direct Taxes (CBDT) wants banks to report any such transaction. Even if the deposits are spread across multiple accounts, any total amount crossing Rs 10 lakh will still attract the attention of the I-T department. An amount of over Rs 10 lakh in an account does not necessarily suggest tax evasion, but it certainly demands scrutiny.
Exceeding Rs 50 lakh in cash deposits or withdrawals from a current account in a fiscal year.
Over Rs 10 lakh in cash is deposited into a fixed deposit (FD) account in a fiscal year.
Sales or purchases of the immovable property exceed Rs 30 lakh in a financial year.
Investments in cash worth more than Rs 10 lakh in a financial year in stocks, mutual funds, debentures, and bonds.
Exceeding Rs 1 lakh in cash payments for credit card bills in a fiscal year.
Exceeding Rs 10 lakh in a fiscal year in payments made for credit card debt using any method other than cash.
Sale of foreign currency of more than Rs 10 lakh in a fiscal year.
Using cash transactions of over Rs 10 lakh to invest in mutual funds, shares, bonds, or debentures,
If you are unsure about the declaration of the source of funds, you must seek advice from a financial advisor. This would help you to manage your finances better and escape the ire of the I-T department.
