In recent years, the Income Tax Department, along with various investment platforms such as banks, mutual fund houses, and broker platforms, has taken measures to discourage cash transactions by implementing stricter rules for the public. As a result, individuals engaging in certain cash transactions may find themselves under the scrutiny of the Income Tax Department, with the possibility of receiving a notice for even slight violations.
Here are the top 5 cash transactions that could attract an income tax notice:
1. Bank Fixed Deposit (FD): While cash deposits in bank FDs are allowed, it’s crucial to adhere to the Rs 10 lakh limit. Exceeding this limit may not only be inadvisable for a bank depositor making cash deposits but could also lead to scrutiny by the Income Tax Department.
2. Real Estate Transactions: In the realm of real estate, any cash transaction above Rs 30 lakh is considered questionable. The Income Tax Department discourages cash transactions beyond this limit in real estate deals, and violators may face income tax notices.
3. Savings/Current Account Deposits: For savings account holders, the cash deposit limit is Rs 1 lakh. Crossing this limit may prompt the Income Tax Department to send a notice. Similarly, current account holders should be cautious, as exceeding the Rs 50 lakh limit could also result in an income tax notice.
4. Investments in Mutual Funds, Stock Market, Bonds, and Debentures: Individuals investing in mutual funds, stocks, bonds, or debentures should ensure that their cash infusion into these investment options does not surpass the Rs 10 lakh limit. Failure to adhere to this limit may lead to the Income Tax Department scrutinizing your last Income Tax Return (ITR).
5. Credit Card Bill Payments: Paying credit card bills in cash should be done within the Rs 1 lakh limit. Exceeding this limit in credit card bill payments may attract the attention of the Income Tax Department, and violators may find themselves subject to further scrutiny.
It’s imperative for individuals engaging in these transactions to be aware of the prescribed limits and guidelines set by the Income Tax Department. Any deviation from these limits could result in the department reviewing financial activities closely. Staying informed and complying with these regulations is essential to avoid unwanted attention and potential income tax implications.