CBDT has directed the income tax department to monitor such high value cash transactions in a “non-intrusive” manner.
High-Value Cash Transactions under ITD Scrutiny: The Income Tax Department is tightening its scrutiny on sectors like hotels, luxury brand sales, hospitals, and IVF clinics due to rampant high-value cash transactions. The Central Board of Direct Taxes (CBDT), the top authority for direct tax administration in India, has directed the department to monitor these transactions in a “non-intrusive” manner. This initiative is part of the Central Action Plan (CAP) for 2024-25 recently issued by the CBDT.
Cash transactions exceeding ₹2 lakh are required to be reported by financial institutions through a Statement of Financial Transaction (SFT). However, CBDT officials have observed that this is not being consistently enforced, leading to widespread circumvention of the rules. The Board emphasized the need for a reporting and verification mechanism to ensure compliance, particularly in transactions requiring a PAN (Permanent Account Number).
CBDT highlighted the importance of verifying “high value” consumption expenditures against the taxpayer’s financial information. Sectors such as hotels, banquet halls, luxury retailers, IVF clinics, hospitals, designer clothing stores, and NRI quota medical college seats have been identified as areas where large cash transactions are prevalent. The Board has instructed the tax department to conduct a verification exercise to gather information in a non-intrusive manner from these sectors.
The scale of cash in the Indian economy is significant. During the 2023-24 fiscal year, the tax department conducted approximately 1,100 searches and raids nationwide to curb tax evasion, resulting in the seizure of assets worth around ₹2,500 crore, including ₹1,700 crore in cash.
CBDT also noted that advancements in data mining and analytics have opened new avenues for identifying potential taxpayers. The department has been tasked with increasing the number of tax return filers by 10% over the previous year. Cases involving non-filers or discrepancies between financial transactions and filed Income Tax Returns (ITRs) are being selected for e-Verification. The outcomes are expected to expand and deepen the taxpayer base.
The Board also raised concerns about the rising arrear demands, which surged from ₹24,51,099 crore on April 1, 2023, to ₹43,00,232 crore by April 1, 2024. To address this, CBDT has mandated the formation of special teams led by a Principal Commissioner of Income Tax in each region by the end of September. These teams will focus on the top 5,000 cases, which account for about 60% of the total demand of over ₹43 lakh crore, aiming to locate records, conduct deep analysis, and recover tax arrears swiftly.
In conclusion, the CBDT is taking strong measures to enhance compliance and recover arrear demands while ensuring that high-value cash transactions in specific sectors are thoroughly scrutinized.
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