here are the instances that could attract an income tax notice.
Using Credit Card For Big Purchases: Should you decide to pay your credit card bill in cash (Rs 1 lakh or more) or through other mode, such as cheque, bank transfer (Rs 10 lakh or more) in a financial year, then the card issuing bank has to mandatorily report the same to the income tax department.
generally, the department issues notice to taxpayers if the credit card expenses “are disproportionate to the returned income.”
sometimes a person might be holding a credit card which is for usage of the firm or other company where they might work. So, the company expenses done through this card might get reported to the income tax department if done above the limits specified. Sometimes, it may also happen that you lend your credit card to a friend who then reimburses you the money he/she spent for his/her shopping needs on your credit card.
advises people “not to incur expenses on behalf of others and then take the reimbursement”, if they want to avoid getting an income tax notice for such credit card transactions.
“Further, a person should keep track of the credit card bill on a monthly basis along with the payment made against that so that wherever such notice is received, it would be easy to respond to the income tax department,” he says.
Purchase Of Goods/Services In Cash: The income tax department wants to discourage the generation and flow of black money through cash payments for high-value goods and services.
Hence, if cash receipts exceed a certain limit for the sale of goods or rendering of services for certain specified persons, then the details of such transactions will have to be mentioned in Form 61A. The data in Form 61A will then be matched with your ITR, and if your expenditure mismatches with your income, a notice may be served to you.
“Form 61A is a statement prescribed to report certain financial transactions by specified persons. Where people buy high-value items, and the transaction value exceeds the specified limits, then the online or offline store will have to report such transactions in their Form 61A,” says Saurrav Sood, a chartered accountant (CA) and practice leader (International tax and transfer pricing) at SW India, an advisory, assurance, tax, accounting and outsourcing services company.
Bank Transactions: Every bank has to report cash deposits and cash withdrawal transactions of Rs 50 lakh or more in a financial year for current accounts, and Rs 10 lakh for savings accounts. Tanna says that banks will also report term deposits of Rs 10 lakh or more in a financial year, unless it is as a result of the renewal of another deposit made previously.
Property Transactions: Unless and until an immovable property’s deed is registered under the Indian Registration Act, 1908, no buyer of such property can legally become the owner of such property. The limit for such a transaction is Rs 30 lakh, and where it exceeds that limit, then the Registrar will report the details of the buyer and the seller of the property to the income tax department.
So when you file your ITR, make sure to include the details of such a transaction, as these details will be matched and cross-verified by the department.
Shares/Mutual Funds Transaction: Every company will have to report details of their shareholders if they receive Rs 10 lakh or more in a financial year for acquiring their company’s share. For mutual funds, debentures, and bonds too, the limit of Rs 10 lakh is applicable.
Forex Transactions: Any receipt from a person for sale of foreign currency or expenses paid in any such foreign currency using banking cards, by draft, travellers’ cheque, or any other financial instrument with value Rs 10 lakh or more, will have to be reported to the income tax department.