Income Tax Department’s Radar: Beware of These 5 High-Value Cash Transactions

In an era dominated by digital transactions, cash still holds its allure for many individuals. However, while small cash dealings may go unnoticed, certain high-value transactions could potentially draw the attention of the Income Tax Department. It’s essential to be aware of these transactions to avoid any unwanted scrutiny from tax authorities. Let’s delve into the key transactions that could raise eyebrows:

1. Depositing Cash in Your Bank Account: Depositing a significant sum of Rs 10 lakh or more in cash into your bank account within a financial year will trigger a report to the Income Tax Department by the Central Board of Direct Taxes (CBDT). Whether the amount is deposited in one go or in multiple transactions across various accounts, the tax authorities may seek an explanation regarding the source of such a substantial sum.
2. Cash Deposits in Fixed Deposits (FDs): Similar to bank accounts, depositing an amount exceeding Rs 10 lakh in cash into one or multiple Fixed Deposits (FDs) during a financial year is bound to raise suspicions. The Income Tax Department may inquire about the origin of these sizable deposits.
3. Large Property Transactions: Engaging in a cash transaction of Rs 30 lakh or more while purchasing property will prompt the property registrar to notify the Income Tax Department. Such a significant cash transaction warrants scrutiny, and the tax authorities may seek clarification regarding the source of funds.
4. Paying Off Credit Card Bills: Settling credit card bills with cash, especially if the amount exceeds Rs 1 lakh, can attract attention from tax authorities. Moreover, cumulative payments totaling Rs 10 lakh or more in any financial year through any means might invite investigation into the source of funds.
5. Purchasing Financial Instruments: Utilizing a substantial amount of cash to purchase shares, mutual funds, debentures, or bonds is another activity that could raise red flags. Any transaction amounting to Rs 10 lakh or more must be reported, and individuals may be required to account for the source of the cash.

Being cognizant of these regulations is crucial to managing your finances prudently and avoiding unwarranted scrutiny from tax authorities. Stay informed and ensure compliance to navigate your financial transactions smoothly and securely.