The Income Tax Department monitors these transactions through Specified Financial Transactions (SFTs). These must be reported using Form 61A, which certain entities are mandated to submit. These entities are responsible for disclosing the high-value transactions they have recorded or maintained over the financial year.
High-value transactions are transactions which involve large amount of money and are reported to the Income Tax Department by banks and other institutions if the transactions cross a certain threshold.
High-value transactions are closely monitored by the Income Tax department through the concept of a statement of financial transaction (SFT) in Form 61A or a reportable account in Form 61B, submitted by specific entities. These entities are mandated to provide information about particular high-value transactions which they have registered, recorded, or maintained during the fiscal year. This enables the Income Tax Department to track an individual’s financial activities and ensure tax compliance.
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) | Which authority should report? |
| 1 | Cash payment for purchasing bank draft, pay order, banker’s cheque or prepaid RBI instruments | 10,00,000 | Banks or co-operative society need to disclose a transaction if the amount deposited exceeds the threshold to the Director of Income Tax by filing Form 61A |
| 2 | Cash deposits in a savings bank account | 10,00,000 | – Banks – Co-operative society – Post master general |
| 3 | Cash deposit or withdrawal from a current account | 50,00,000 | Banks or co-operative society |
| 4 | Sale or purchase of an immovable property | 30,00,000 | 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) | 10,00,000 | – Company issuing Shares, Debentures, Bonds – Mutual Fund Trustee |
| 6 | Payment of credit card bill in cash | 1,00,000 | Banks or co-operative society |
| 7 | Payment of credit card bill other than through cash | 10,00,000 | Banks or co-operative society |
| 8 | – 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 | 10,00,000 | Authorised Person under Foreign Exchange Management Act, 1999 |
| 9 | Cash deposits in the fixed deposit or recurring deposit account | 10,00,000 | – Bank – Co-operative society – Nidhi Company – NBFC |
Steps Taken By The IT Department To Trace High-Value Transactions
Below are some of the measures taken by the department to trace high-value transactions:
- Upgraded Form 26AS:
The Department has upgraded Form 26AS to reflect Specified Financial Transactions (SFT). Moreover, it has introduced ‘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 2,50,000. But, from 1st April 2019, ITR filing is mandatory if the individual has entered into certain specified high-value transactions, even if the income is less than Rs 2,50,000. For example, deposits in one or more current a/c maintained with a bank/co-operative bank are more than Rs 1 crore, foreign travel expenditure is in excess of Rs 2 lakh, or electricity bill expenditure is in excess of Rs.1 lakh during the year.
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 said high-value transaction 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.
Launch Of e-Campaign
The income tax department has launched an e-campaign for the voluntary compliance of income tax for the convenience of taxpayers.
The campaign focuses on the assessees/taxpayers who are either:-
- Non-filers of the income tax return
- Have discrepancies/deficiencies in their returns
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. The department can collect information related to GST, imports/exports, and transactions in securities, derivatives, commodities and mutual funds through 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’.
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:
Step 1: Log in to your income tax e-filing account.
Step 2: In the home page, go to ‘Pending Actions’> Compliance Portal > ‘e-Campaign (AY 2021-22 Onwards)’.
Step 3: 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.
Step 4: Select the information category
‘e’ would be marked against the information category for which you have received the communication.
Step 5: Select the Transaction
The information on which feedback is required would be marked as ‘Expected’.
Step 6: 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
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.
Step 1: Click on the ‘Provide Response’ button provided against the ‘Preliminary Response’ section.
Step 2: On the next page, respond by selecting the relevant drop-down.
Step 3: 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
Step 4: After filling in all the relevant information, submit the response. You can download the preliminary response submitted from the ‘Activity History’ screen.
If you don’t have active e-campaigns or e-verifications, you will get the message – No Compliance Record has been generated for you.
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.
To know more about how to give feedback, you can click on the link: Submit feedback on information in AIS.
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.