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Know Deposit Limits In FDs, Bank Accounts & Mutual Funds To Avoid IT Notice

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According to financial analysts, taxpayers should be wary of six types of high-value transactions, particularly those made in cash, because the Income Tax Department is extremely attentive to this. Banks, intermediaries, and other firms shall disclose all high-value transactions to the Income Tax Department, and failure to do so will lead to a tax notice being imposed. The Income Tax Department will look into six different types of high-value transactions. This comprises all cash deposits of Rs 10 lakhs or more that are declared by commercial and cooperative banks each year.

 

Know Deposit Limits In FDs, Bank Accounts & Mutual Funds To Avoid IT Notice

The Central Board of Direct Taxes (CBDT) has already stated that banks must disclose if an individual invests an amount of Rs 10 lakh or more in one or more fixed deposit other than a fixed deposit made by the renewal of another time deposit in a calendar year. Similarly, the CBDT has declared it extremely important for a bank or a cooperative bank to record cash deposits totalling Rs 10 lakh or more in one or more bank accounts other than an individual's current account and time deposit within a calendar year. If an investor invests money in mutual funds worth more than Rs 10 lakh in a given financial year, the income tax authority may issue a notice to the investor.

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In mutual funds and equity investments, one should attempt not to exceed the Rs 10 lakh limit, as exceeding this limit can bring you under the Radar of the Income Tax Department. As a result, cash transactions in mutual funds exceeding Rs 10 lakh in a single financial year should be avoided. A similar restriction applies to the reporting of share purchases and the purchase of bonds or debentures. Apart from bank FDs and mutual funds, there are certain high-value transactions to disclose, such as credit card cash repayments totalling Rs 1 lakh or more, and overall payments totalling Rs 10 lakhs or more by any mode throughout the year.

 

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Any immovable property worth more than Rs 30 lakh must be reported to the sub-register. Taxpayers must make sure that all of their transactions are completely reported in their tax returns. Taxpayers often fail to specify the details of some high-value transactions to the tax department when completing their income tax returns. This usually goes beneath the radar of the Income Tax Department. In the event of non-disclosure, the Income Tax Department may take legal action or issue notice to the delinquent taxpayer.

Story first published: Friday, June 4, 2021, 17:18 [IST]
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