In the last few years, the income tax department and various investment platforms, such as banks, mutual fund houses, broker platforms, and so on have become very alert with respect to cash transactions. They have tightened the cash transaction rules for the public in general. They allow cash transactions to a certain limit only. Even if there is a little violation, the income tax department may send a notice to the offender.
Let us read on to understand about six high value cash transactions that can get you an income tax notice.
Making High Value Deposits In Bank FDs
Cash deposits in bank FD should not be more than Rs. 10 Lakhs. The central board of direct taxes (CBDT) has made an announcement that banks must inform if individual deposits are more than the laid down limit in one or more fixed deposits.
Cash Deposits In Savings Bank Accounts
The amount that can be deposited in a bank account is capped at Rs. 10 Lakhs. The income tax department may issue an income tax notice to a savings account customer who invests more than Rs. 10 Lakhs in a financial year. Consequently, any cash deposits or withdrawals from a bank account that sum up to more than Rs. 10 Lakhs must be revealed to the IRS. The current account amount is capped at Rs. 50 Lakhs.
As per CBDT, a cash payment of Rs. 1 Lakh or more against credit card arrears must be tracked. Also, if a payment of Rs. 10 Lakhs or more is made to settle credit card bills in a financial year, it must be brought to the notice of the tax authorities. The income tax that applies to credit card purchases is the most worrisome. You must make sure that you do not exhaust the credit card spending limit. The tax authorities can track your credit card transactions since your credit card information is connected to your PAN card. The linking of the PAN card to your credit card information also allows the government to readily monitor the amount you spend online. Any important transaction should be revealed when submitting an ITR (income tax return).
Investing In Shares, Debentures, And Mutual Funds Related Cash Transactions
Investors investing in mutual funds, stocks, bonds, or debentures must make sure that the cash transactions in these investments is not more than Rs. 10 Lakhs in a financial year. The income tax department has created an annual information return (AIR) statement of financial transactions to track high value cash transactions of taxpayers. Tax officials will collect details about uncommonly high value transactions in a particular financial year.
Purchase Or Sale Of An Immovable Property
You will come under the scanning eye of the tax authorities if you purchase a property for an amount of Rs. 30 Lakhs or more. The property registrar must disclose any investment in or sale of immovable property for an amount of Rs. 30 Lakhs or more to the tax authorities. The property acquisition or sale must be communicated using Form No: 26AS.
Sale Of Foreign Currency And Indulging Expense Of Foreign Exchange
If an amount of Rs. 10 Lakhs or more is received by an individual for the sale of foreign currency along with any credit in such currency through a debit card, credit card, insurance, traveler’s cheque, draft, or other instruments, then the income tax department should be notified.
Big ticket transactions listed above can lead you to trouble with the income tax department. Thus, banks, mutual fund houses, brokerages, and registrar of properties will have to inform the income tax department.
FAQS of Six High Value Cash Transactions That Can Get You an Income Tax Notice
1:How do you find high value transactions?
You can verify your Form 26AS under the AIR section If any investment or expense has been classified as a high value transaction. You can find the details about high value financial transactions under PART-E of your Form 26AS.
2:What happens when the aggregate cash deposits are 10 Lakhs or more?
Total cash deposits of 10 Lakhs and above during a financial year, in one or more accounts, (current account and time deposit of a person excluded) should be reported mandatorily by the bank or cooperative bank. The CBDT has made it mandatory.
3:How does the income tax department trace high value financial transactions?
Reporting authorities, such as post offices, banks, registrars, and companies should inform about high value transactions to the director of income-tax by filing Form 61A called the statement of financial transaction.
4:What will happen if you do not respond to an income tax notice?
If you do not respond to the tax notices within the stipulated time, it could have various consequences. “Non-compliance of a tax notice would attract a penalty of Rs. 10,000 and may lead to judgment assessment by the tax officer,” said Agarwala. In some cases, “prosecution up to one year may also apply," said Gupta.
5:What should a taxpayer do if he/she gets an income tax notice?
If the taxpayer gets an income tax notice, he/she should acknowledge the questionnaire issued along with the necessary documents that the taxpayer has to submit to the income tax department. The assessing officer should serve this notice within a stipulated period of 6 months after the completion of the assessment year to which it concerns.
6:Can we file a 3 year old Income tax return?
You can file your previous year’s return in the current year. You have to pay a penalty or interest for filing the previous year’s income tax return. If you do not have a tax liability, then you can file your previous year’s return without paying penalty or interest.
7:What are the types of income that are not taxable?
- Inheritance, gifts, and donations
- Cash refunds on items purchased from the retailer, manufacturer, and dealer
- Alimony payments (for divorce orders settled after 2018)
- Payments for child support
- Most healthcare benefits
- Money that is reimbursed from qualifying adoptions.
- Welfare payments.