In an era of advanced data analytics, the Income Tax Department has upped its game, employing sophisticated techniques to detect discrepancies in individuals’ income declarations and expenses. This vigilant scrutiny extends to various transactions, both in cash and through digital channels. Here are five transaction mistakes that could land you an income tax notice without delay.
1. Large Cash Deposits in Savings Accounts:
- Transactions exceeding ₹10 lakh in a financial year across all savings accounts raise red flags. The Income Tax Department scrutinizes these deposits to ensure the legitimacy of the funds and their alignment with the taxpayer’s declared income.
2. Fixed Deposits Made with Cash:
- Cash deposits exceeding ₹10 lakh for fixed deposits within a financial year attract attention. This measure is in place to monitor substantial investments in fixed deposits and prevent the potential laundering of unaccounted money.
3. Purchases of Shares, Mutual Funds, and Bonds in Cash:
- Investments surpassing ₹10 lakh in shares, mutual funds, or bonds, when made in cash, trigger inquiries by the Income Tax Department. The goal is to verify the source of funds and ensure compliance with tax laws.
4. Repaying Credit Card Bills in Cash:
- While there isn’t automatic scrutiny for credit card bill repayments in cash, payments exceeding ₹1 lakh may prompt the department to inquire about the source of funds.
5. Cash Transactions Related to Property Purchases:
- Property transactions exceeding ₹30 lakhs require the buyer to disclose the source of funds. This measure aims to prevent money laundering and ensures transparency in high-value property transactions.
Despite the common belief that cashless transactions escape scrutiny, the reality is different. The Income Tax Department maintains a vigilant watch on all high-value transactions, encompassing both cash and digital modes. Financial institutions are mandated to report transactions exceeding predetermined thresholds to ensure the enforcement of tax laws and maintain financial transparency.
