If you engage in high-value cash transactions, then you are likely to get a notice from the Income Tax Department. When the value of a transaction surpasses a specific level, the Income Tax Department must be notified.
The tax department maintains a tight eye on a variety of cash-related activities; banks, mutual fund companies, brokerages, and property registrars must notify the tax department if you trade with cash in excess of the specified limit.
The Income Tax Department has reached agreements with several government entities to access the financial information of people who engage in high-value transactions but fail to mention them on their tax returns.
Here are a few examples of transactions for which you may receive a notification from the income Tax Department:
Cash Deposit In Savings Bank Account
A bank account's cash deposit limit is Rs 10 lakh. The Income Tax Department may issue an income tax notice to a savings account customer who deposits more than Rs 10 lakh in a financial year.
As a result, any cash deposits or withdrawals from a bank account that total more than Rs 10 lakh in a financial year must be reported to the IRS. The current account maximum is Rs 50 lakh.
High-Value Cash FD
The maximum amount of cash that may be deposited in a bank FD is Rs 10 lakh. If you are a bank depositor, you are advised not to exceed the Rs 10 lakh limit while making a cash deposit into a bank FD account. The Central Board of Direct Taxes (CBDT) has ordered banks to reveal if individual deposits in one or more fixed deposits exceed the limit allowed.
Paying Credit Card Bills
According to the CBDT, cash payments of Rs 1 lakh or more against credit card arrears must be recorded. Additionally, if payment of Rs 10 lakh or more is made to settle credit card obligations in a financial year, the amount must be reported to the tax authorities. The income tax that applies to credit card purchases is, however, the most pressing worry.
You must ensure that you do not exceed your credit card spending limit, since the tax authorities maintain track of credit card transactions because your credit card information is connected to your PAN Card, allowing the government to readily monitor your spending online. Any significant transaction should be disclosed when submitting an ITR (Income Tax Return).
Shares, debentures, bonds, and mutual funds related cash transactions
Companies or organizations that issue bonds or debentures would be required to record receipts of Rs 10 lakh or more in a financial year from any individual for the purpose of purchasing bonds or debentures. A similar restriction has been imposed for reporting stock and mutual fund purchases.
The Income Tax Department has established an Annual Information Return (AIR) account of financial transactions to help taxpayers track high-value transactions. On this basis, tax officials will collect information on unusually high-value transactions in a given fiscal year.
Purchase or sale of an immovable property
The property registrar must disclose any investment or sale of immovable property worth more than Rs 30 lakh to the tax authorities. The property acquisition or sale should be reported using Form No. 26AS. You are on the Income Tax Department's radar if you purchase or sell a property for more than Rs 30 lakh.