The Income Tax Department has created a section providing for flagging significant cash transactions, and other transactions of the nature that may need a closer scrutiny. These transactions are reflected in Form 26AS and AIS, and they are called SFT transactions.
Banks and other institutions with whom you undertake the transactions are required to report the specified transactions in the Statement of Financial Transaction.
What are High-Value Transactions?
Banks and other institutions report financial transactions involving large amounts of money to the Income Tax Department if they exceed a certain threshold.
The Income Tax Department closely monitors high-value transactions through the concept of a statement of financial transaction (SFT) in Form 61A or a reportable account in Form 61B submitted by specific entities who are mandated to provide information about particular high-value transactions by 31 May of the immediate next fiscal year.
Specified High Value Transactions
Here is a list of transactions that may trigger a notice from the Income Tax Department, as this data is collected from the respective reporting authorities:
| Sr. No. | Transaction | Threshold (Rs) | Reporting Authority |
| 1 | Cash payment for purchasing bank draft, pay order, banker’s cheque or prepaid RBI instruments | 10 lakhs | Banks or co-operative society |
| 2 | Cash deposits in a savings bank account | 10 lakhs | – Banks – Co-operative society – Post Master General |
| 3 | Cash deposit or withdrawal from a current account | 50 lakhs | Banks or co-operative society |
| 4 | Sale or purchase of an immovable property | 30 lakhs | The Property Registrar/Sub-registrar must report a transaction exceeding the threshold via Form 61A. |
| 5 | Investments in shares, mutual funds, debentures and bonds in cash (If amount is transferred from one scheme to another, then reporting is not required) | 10 lakhs | – Company issuing Shares, Debentures, Bonds – Mutual Fund Trustee |
| 6 | Buy buck of shares from any person (than other shares bought in an open market) | 10 lakhs | Listed Company |
| 7 | Payment of credit card bill in cash | 1 lakhs | Banks or co-operative society |
| 8 | Payment of credit card bill other than through cash | 10 lakhs | Banks or co-operative society |
| 9 | – Sale of foreign currency – Crediting FOREX card – Spending in foreign currency through a debit or a credit card or through traveler’s cheque or any other instrument | 10 lakhs | Authorized Person under the Foreign Exchange Management Act, 1999 |
| 10 | Cash deposits in the fixed deposit or recurring deposit account | 10 lakhs | – Bank – Co-operative society – Nidhi Company – NBFC |
| 11 | Receipt of cash payment for sale, by any person, of goods or service of any nature (other than those specified at Sr. no. 1 to 10 of this rule) | 2 lakhs | Any person liable for audit under section 44AB of the Income Tax Act. |
Who Receives Email/ SMS of E-campaign from Income Tax Department?
Under e-campaign, the income tax department sends emails/SMS to identified taxpayers to verify their financial transactions related to information received by the IT department from various sources such as SFT, TDS, TCS, etc., based on the information collected from various third parties.
You may receive an email/SMS from the e-campaign when:
- You have not filed Income Tax Return: Even if the income tax return was filed correctly, you must provide feedback upon receiving such notice.
- There are discrepancies/deficiencies in your Income Tax Returns: Discrepancies do not always indicate that information has been hidden. Instead, it could be due to the errors in AIS. You must report such errors to the IT department by ‘Providing feedback on AIS’.
Action to be Taken if Form 26AS Reflects SFT Transactions
- Firstly a taxpayer must verify that the SFT transactions reported in the Form 26AS are correct.
- Subsequently, a taxpayer must ensure to report the such transactions while filing the ITR, and that the tax liability on the same has been accurately calculated.
- Any error or mismatch in reporting such transactions may trigger an income tax notice.
How to Comply with E-campaign Notice Online and How to Submit Response?
- If you have received an email or SMS for high-value transactions or non-filing of returns, you can respond to the income tax department by following the below steps:
- Log in to your income tax e-filing account.
- In the home page, go to ‘Pending Actions’> Compliance Portal > ‘e-Campaign’.
- Select the relevant e-campaign.
- After redirecting from the e-filing portal, the landing page of the e-campaign view will be displayed. Select the relevant e-campaign and click on ‘provide feedback in AIS’.
- If you don’t have active e-campaigns or e-verifications, you will get the message – “No Compliance Record has been generated for you”.
- For example, in the case of high-value transactions or non-filing of income tax returns, it will show the below information under the ‘e-Campaign’ list.
- Select the Information Category
- ‘e’ would be marked against the information category for which you have received the communication.
- Select the Transaction
- The information on which feedback is required would be marked as ‘Expected’.
- Submit Response
- From the options, select the most appropriate response:
- Information is correct
- Information is not fully correct
- Income is not taxable
- Information relates to other PAN/year
- Information is duplicate/included in other displayed information
- Information is denied
- From the options, select the most appropriate response:
- Following are the categories where the response is expected from the taxpayer under e-campaign:
- Preliminary Response
- Feedback on Information on AIS
Preliminary Response
Under the ‘Preliminary Response’ section, the taxpayer is expected to respond to relevant questions. The queries under the Preliminary Response section are based on campaign type (non-filing of return/certain high-value transactions done by the taxpayer).
For example, for campaign type – ‘Non-Filing of Income Tax Return’, the taxpayer is expected to submit a response whether an income tax return has been filed or not.
- Click on the ‘Provide Response’ button provided against the ‘Preliminary Response’ section.
- On the next page, respond by selecting the relevant drop-down.
- Provide additional details as required by the income tax department. For example, For the question ‘Whether Income Tax Return (ITR) has been filed?’ the following additional details are required:
- If ITR has been filed:
- Acknowledgement Number – Enter the Acknowledgement Number generated for the Income Tax Return filed for the relevant A.Y.
- Date – Select Date of Income Tax Return filing
- Mode – Select Mode of Income Tax Return filing (i.e., e-Filed return | Paper filed return)
- Circle/ Ward and City – Enter Circle/Ward and City of the taxpayer
- Remarks – Enter Remarks for Income Tax Return filing (Optional)
- If ITR has not been filed
- Reason – Select the Reason for not filing the ITR
- Remarks – Enter Remarks for not filing the ITR
- After filling in all the relevant information, submit the response. You can download the preliminary response submitted from the ‘Activity History’ screen.
Submit Feedback on Information in AIS
- You have to provide feedback on the information under the e-campaign, where no feedback has been provided. You must provide feedback on the L1 information, which is marked as ‘Expected’ as shown in the below screenshot.
- In this way, you can submit the response to the income tax department for the notice on the high-value transactions or non-filing of the income tax return.
- If you don’t have active e-campaigns or e-verifications, you will get the message – No Compliance Record has been generated for you.
Steps Taken by the IT Department to Track High-Value Transactions
Below are some of the measures taken by the department to trace high-value transactions:
Upgraded Form 26AS and AIS
- The Department has upgraded Form 26AS to reflect Specified Financial Transactions (SFT). Moreover, it has introduced the ‘Annual Information Statement (AIS) where you can view all the financial information.
- The specified institutions, such as registrars, banks, post offices, stock exchanges, etc., must report transactions exceeding the specified threshold to the income tax department.
- These transactions are then reflected in the AIS portal so that the taxpayer can voluntarily disclose all the information based on the AIS information.
Applicability of TDS on Cash Withdrawal
- To trace high-value transactions, the government has proposed that the banks must deduct TDS at 2% on cash withdrawals more than Rs 1 crore during the financial year.
- If the person does not file ITR for the last three financial years, then TDS at 2% shall be deducted for cash withdrawals exceeding Rs 20 lakh, and for cash withdrawals exceeding Rs 1 crore, TDS will be deducted at 5%.
Mandatory Filing of Returns
- An individual is required to file ITR if income exceeds Rs 2.5 lakhs. However, ITR filing is mandatory if the individual has entered into certain specified high value transactions, even if the income is less than Rs.2.5 lakhs.
- Example if deposits in one or more current a/c maintained with a bank/co-operative bank are more than Rs 1 crore, foreign travel expenditure exceeding Rs. 2 lakh, or electricity bill expenditure exceeding Rs. 1 lakh during the year.
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