High-value transactions, including bank deposits, mutual fund investments, property dealings, and share trading, are scrutinized by the IT Department
Taxpayers should be aware that high-value transactions exceeding specific limits are closely monitored by the Income Tax Department. Failing to disclose such transactions when filing Income Tax Returns (ITR) could lead to notifications from tax authorities.
Key Transactions Under Surveillance
High-value transactions, including bank deposits, mutual fund investments, property dealings, and share trading, are scrutinized by the IT Department. If these transactions surpass the designated thresholds, individuals must report them to the I-T department to avoid receiving a notice.
Common Errors Leading to ITR Rejection or Notices
Mistakes during the income tax return filing process can result in ITR rejection or trigger income tax notices. To assist in tracking high-value transactions, the Income Tax Department has agreements with government agencies and financial institutions.
Bank Account Transactions
Any transaction exceeding Rs 10 lakh in a savings bank account or Rs 50 lakh in a current bank account in a financial year must be disclosed to the Income Tax department.
Deposits above Rs 2 lakh in a single transaction also come under scrutiny.
Fixed Deposits
The recent increase in fixed deposit (FD) rates has made them attractive to investors. The reporting threshold for cash deposits in fixed deposits is Rs 10 lakh during a single financial year. This threshold applies to the total value of all FD investments across all accounts and institutions, not just individual deposits.
Banks must file Form 61A, a statement of financial transactions, to disclose if total deposits in fixed deposits exceed Rs 10 lakh.
Cash Payments
Banks or cooperative societies are required to report transactions where cash payments are made for purchasing bank drafts, pay orders, or banker’s cheques.
Credit Card Payments
Cash payments exceeding Rs 1 lakh annually for credit card bills.
Non-cash payments exceeding Rs 10 lakh across all credit cards are monitored.
Also Read: How to file ITR-2 online with salary, capital gains and other incomes for FY 2023-24
Other Significant Transactions
The Income Tax Department can send notifications for transactions like:
Domestic business-class air travel.
Tuition or donation payments.
Purchases of jewellery, white goods, paintings, marble.
Electricity expenses exceeding Rs 1 lakh in a fiscal year.
Real Estate Transactions
In India, buyers of properties valued over Rs 30 lakh must disclose the origin of funds to combat tax evasion and money laundering.
Thresholds: Rs 50 lakh for urban properties, Rs 20 lakh for rural areas. Individual states may have stricter regulations.
Declaration: Include the source of funds in registration documents or submit Form 26QB to the ITD.
Even if the property value is below the threshold, the ITD can request information on the source of funds if there are inconsistencies in income or financial activities. Failing to declare the source of funds can lead to penalties, tax assessments, and investigations.
Responding to ITD Notices
To address a notice from the ITD regarding high-value transactions, gather documentation supporting your explanation of the funds’ origin. This includes bank statements, investment records, and legal documents for inheritances. If uncertain, consult a tax consultant for tailored advice. Maintaining transparency and complying with tax laws is crucial for responsible financial planning and minimizing legal risks.
By following these guidelines and reporting high-value transactions accurately, taxpayers can avoid complications and ensure compliance with the Income Tax Department’s requirements.
Also Read: Cash Transaction Limits under Income Tax
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