Income tax department has become highly vigilant against cash transactions these days. In the last few years, Income Tax Department and various investment platforms like bank, mutual fund houses, broker platforms, etc. have tightened the cash transactions rules for public in general. Now, these investment and lending institutions allow cash transaction to a certain limit only. In the case of little violation, the Income Tax Department may send notice to the offender.
Income tax department has created an Annual Information Return (AIR) statement of financial transactions to trace high-value cash transactions of taxpayers
Advising taxpayers to report high value cash transaction in one’s income tax return (ITR); “If an individual makes high-value cash transactions, there are chances that he or she might get a notice from Income Tax Department. The different cash-related transactions include banks, mutual fund houses, brokerages and property registrars. The high-value transactions must be always reported to the income tax department if the value surpasses a particular threshold. The Income Tax Department has settlements with multiple government agencies to obtain financial records of individuals who indulge in high-value transactions but do not report them on their tax filing.
On top 5 cash transactions that may lead to income tax notice, the Managing Director of SEBI registered income tax solution provider company listed out the following:
1] Bank fixed deposit (FD): Cash deposits in bank FD should not exceed ₹10 lakh. The Central Board of Direct Taxes (CBDT) has announced that banks must reveal if individual deposits are more than the prescribed limit in one or more fixed deposits.
2] Bank savings account deposits: The cash deposit cap in a bank account is ₹10 lakh. If a savings account holder deposits more than ₹10 lakh during a financial year, the income tax department may serve an income tax notice. Meanwhile, cash deposits and withdrawals in a bank account crossing ₹10 lakh limit in a financial year must be revealed to the tax authorities. In current accounts, the cap is ₹50 lakh.
3] Credit card bill payment: As per the CBDT norms, payment of ₹1 lakh or more in cash against credit card bills should be reported to income tax department. Additionally, if payment of ₹10 lakh or higher is paid in a financial year to settle credit card bills, the payment must be disclosed to the tax department.
Any big transaction should be revealed while filing ITR. In case you are using credit cards on any high-value transactions, make sure to disclose them on Form 26AS while filing your ITR to avoid getting an income tax notice,” said Amit Gupta.
4] Real estate property sale or purchase: The property registrar must have to reveal any investment or sale of immovable property for an amount of ₹30 lakh or more to the tax authorities. So, in any real estate property purchase or sale, taxpayers are advised to report their cash transaction in Form 26AS as property registrar would definitely report about it.
5] Investment in shares, mutual funds, debentures and bonds: Investors who invest in mutual funds, stocks, bonds or debentures must ensure that their cash transaction in these investments does not exceed ₹10 lakh in one financial year. The income tax department has created an Annual Information Return (AIR) statement of financial transactions to trace high-value cash transactions of taxpayers. Tax officials will gather details against unusual high-value transactions on this basis in a particular financial year.