The Income Tax Department in India keeps an eye on high value transactions such as cash deposits, property deals, foreign exchange, electricity bills etc. and can send notices if there is any suspicion.
Income Tax Department: The Income Tax Department in India is constantly monitoring high value transactions so that any kind of tax evasion can be prevented. Whether it is depositing huge cash in the bank or buying property worth crores, information about every transaction goes into the system and if needed, the taxman can directly ask questions. Therefore, if you are also making big transactions, then it is very important to understand under which circumstances your transaction can come under the purview of red flag.
The government has given the responsibility to banks, mutual fund houses and other financial institutions to send the report of high value transactions to the tax department. This makes it easier for the taxman to identify those people who try to save tax by hiding their real income. In such a situation, it is important for the common people to know which 11 types of transactions directly come on the radar of the tax department.
Which transactions come under surveillance?
Cash Deposit (Savings Account) – Banks/Post Offices/Co-operative institutions report if ₹10 lakh or more cash is deposited in a savings account in a year.
Cash in Current Account – If more than ₹50 lakh is deposited or withdrawn in a current account in a year, then it also comes under surveillance.
Real Estate Deal – It is mandatory for the Registry Office to report a transaction of ₹30 lakh or more to the Tax Department when buying or selling a property.
Investment in Shares, Mutual Funds, Bonds – Companies and Trusts report investments of ₹10 lakh or more in cash.
Cash Payment of Credit Card Bill – If a cash payment of more than one lakh rupees has been made, then banks flag it.
Non-Cash Payment of Credit Card Bill – Payment of more than ₹10 lakh by digital or cheque also comes under the purview of the department.
Foreign Exchange Transactions – Foreign exchange expenditure/transactions exceeding ₹ 10 lakh in a financial year are reported by authorised dealers.
Fixed/Recurring Deposit (Cash) – Information is given on depositing ₹10 lakh or more in cash in banks or NBFCs.
DD and Pre-paid RBI Instruments – Cash payment of ₹10 lakh or more is reported.
Expense on foreign travel – If you spend ₹2 lakh or more on foreign travel, then filing ITR becomes mandatory.
Electricity bill payment – If you pay electricity bill of ₹1 lakh or more annually, you may have to file ITR even if you have low income.
Why does the tax department keep an eye?
- All these transactions are recorded in Form 26AS and Annual Information Statement (AIS).
- It is easy for the Income Tax Department to match them and in case of discrepancy, a notice can be issued.
- If your Income Tax Return (ITR) does not match despite spending big, then suspicion increases.
- Cash withdrawals exceeding ₹1 crore may be subject to 2% TDS (and 5% for non-filers).
Do’s and precautions
- Always check your Form 26AS and AIS before filing returns.
- Keep documents and proof of every high-value transaction safe.
- Even if your income is below the income tax limit, it may be necessary to file ITR in case of big transactions like ₹1 crore deposit, ₹2 lakh foreign expenditure or ₹1 lakh electricity bill.
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